| This study examines a sample of sell-side financial analyst reports, categorizes the information cited in the full-text of the reports, and identifies sources for this information. A model is developed and tested to explain the differential level of analysis provided by analysts. While previous studies have focused on information sources self-reported by analysts, this study empirically investigates potential sources of the information conveyed in their reports. The study has utilized an extensive database including corporate disclosures, SEC filings, financial press coverage, trade journal coverage, as well as the complete coded text of a financial analyst report for each sample firm.; The evidence developed from the categorization of the financial analysts' sources shows that the majority of financial and operating data cited in the analysts' reports are not found in the basic financial statements. Furthermore, the information contained in the balance sheet and cash flow statement is rarely mentioned by analysts. The narrative sections of the annual report provided almost twice the amount of cited information as did the basic financial statements.; The study also provides information on how the characteristics of firms affect the collection of information by financial analysts, who then disseminate that information in the marketplace. The proportion of nonreport information is analyzed to identify important determinants of analyst coverage. Results indicate that level of inside ownership, variability of firm earnings, firm complexity and firm size all affect the amount of information cited by the analysts. |
