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Title: The effect of the Private Securities Litigation Reform Act on analyst forecast properties : the impact of firm size and growth opportunities
Authors: Leung, S
Srinidhi, B
Keywords: Analyst forecasts
Private Securities Litigation Reform Act
Forecast errors
Forecast dispersion
Revision frequency
Issue Date: 2006
Publisher: Wiley-Blackwell
Source: Journal of business finance and accounting, 2006, v. 33, no. 5-6, p. 767-792 How to cite?
Journal: Journal of business finance and accounting 
Abstract: We provide evidence that the effect of the Private Securities Litigation Reform Act (the Act) of 1995 on analyst forecast properties is conditional on firm size and growth opportunities. We show that analyst coverage, frequency of forecast revisions, forecast errors and dispersion after the Act decreased for large firms and for firms with low growth opportunities but increased for small firms and for firms with high growth opportunities. These results are consistent with the hypothesis that the Act results in additional high quality disclosures in large firms, which face higher litigation risk and tighter scrutiny from investors but not in smaller firms. Our findings of increases in analyst coverage and revision but deterioration in accuracy and precision of analyst forecasts for firms with high growth opportunities after the Act suggest that in spite of increased corporate disclosures, the information environment for analysts deteriorated in those firms.
ISSN: 0306-686X
DOI: 10.1111/j.1468-5957.2006.00020.x
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