Bold Security Analysts' Earnings Forecasts and Managers' Information Flow

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Abstract
We examine the relation between security analysts' annual earnings forecast boldness ("bold analysts") and changes in the inferred flow of earnings-related information from managers of the forecasted firm to bold analysts. We find that unfavorably bold analysts experience an improvement in their subsequent relative forecast accuracy. Favorable forecasters, however, experience a decrease in subsequent relative forecast accuracy. Our forecast revisions tests suggest that the market recognizes the improvement in subsequent relative forecast accuracy for unfavorably bold analysts and places no additional weight on forecast revisions from favorably bold analysts.