The informational role of analysts’ textual statements

This study explores the reasons why textual tones in analysts’ reports, a representative qualitative content of analysts’ reports, possess informational value. We predict that analysts use textual statements to disclose fundamental information that is not reflected in their quantitative outputs. Consistent with our prediction, we find that tones predict subsequent revisions in earnings and sales forecasts. Furthermore, the results show that the information contained in the tone differs among analysts with different incentives to utilize the textual statements, supporting the intentional disclosure story. In addition, the lead-lag relationship between textual and quantitative outputs induces a gradual price adjustment to the information contained in the textual statements.