Analyst comments and the relation between analyst and firm disclosures

This dissertation consists of two empirical essays. In the first chapter, I study analysts\u27 comments, which are written disclosures distributed to large institutional clients as part of the brokerage firms\u27 daily sales process. Analysts\u27 comments are issued three times more frequently than recommendations and forecast revisions, and represent the bulk of analyst disclosures. The tests in this paper represent the first systematic study of comments. I find that comments provide an economically significant amount of information beyond that contained in previously-studied firm and analyst disclosures. I also show that comments are less (but continue to be) informative after implementation of Regulation FD. In addition, based on an analysis of the timing of comments, recommendations and forecasts, I show that the different types of analyst disclosures strongly complement each other. In the second chapter, I study whether sell-side analysts complement or substitute for firm disclosures. My analysis indicates that analysts are mainly substitutes for firm disclosures and the degree to which they substitute is increasing for firms that are larger in size and have more variable performance, and is decreasing for firms with higher levels of R&D spending. This result is central to hypotheses in the voluntary firm disclosure literature, which generally ignore the role of analysts and hence implicitly assume analysts either have no effect or complement firm disclosures. I conduct a small-sample content analysis of the text of 1,306 analyst comments to characterize their non-firm sources of information. I find that the majority of analysts\u27 comments are associated with some new information. The primary type of new information is firm-related news, although it does not represent the majority of information. The major source of non-firm information is earnings announcements and management forecasts issued by related public firms (i.e., intra-industry transfers). The analysis also indicates that analysts do indeed gather private information and that it is focused on industry phenomena