UWSpace is currently experiencing technical difficulties resulting from its recent migration to a new version of its software. These technical issues are not affecting the submission and browse features of the site. UWaterloo community members may continue submitting items to UWSpace. We apologize for the inconvenience, and are actively working to resolve these technical issues.
 

KPI Information Acquisition by Analysts: Evidence from Conference Calls

Thumbnail Image

Files

TANG_Qi.pdf (1.62 MB)

Date

2021-09-10

Authors

Tang, Qi (Rachel)

Journal Title

Journal ISSN

Volume Title

Publisher

University of Waterloo

Abstract

As performance measures based on generally accepted accounting principles (GAAP) deteriorate in usefulness, information users are placing more reliance on alternative performance measures. Key performance indicators (KPIs) are a subset of these alternative performance measures illustrating industry-specific firm financial and operational performance. In this study, I investigate analysts’ demand for KPI-related information in earnings conference calls and whether managers adjust their decisions about voluntary KPI disclosure in subsequent earnings calls. Using 51 KPIs for six industries, I find that after analysts request KPI-related information, managers increase both the likelihood and the intensity of their KPI disclosure in subsequent earnings conference calls. This effect is more pronounced when the firm’s earnings are less relevant, consistent with the supplemental role of KPIs to GAAP financial performance measures. I also find that the proprietary costs faced by the firm and the relationship between analysts and management (as proxied by whether the analysts are invited to ask the first questions during past earnings calls) matter when managers make KPI disclosure decisions following analyst demand. As the findings suggest a well-functioning demand-supply mechanism of KPI disclosure, I further explore whether financial analysts use KPI-related information to improve the quality of their work. I find a significantly positive association between KPI disclosure and the accuracy of analysts’ earnings forecasts. This effect is more pronounced when the KPI disclosure is driven by analyst demand. Collectively, my study highlights the role that analysts play in voluntary KPI disclosure when there is an absence of mandatory integrated reporting.

Description

Keywords

key performance indicators (KPIs), earnings conference calls, financial analysts

LC Keywords

Citation

URI

http://hdl.handle.net/10012/17365

Collections

Theses
Accounting and Finance