Information content and informativeness of analysts’ report: evidence from Malaysia

Purpose This study aims to document the influence of information content and the informativeness of analyst reports towards cumulative abnormal return (CAR) in the Malaysian market. Design/methodology/approach Samples of analyst reports for the period 2010, January 4th until 2015, December 24th...

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Main Authors:	Mohd Thas Thaker, Hassanudin, Mohamad, Azhar, Mustaffa Kamil, Nazrol Kamil, Duasa, Jarita
Format:	Article
Language:	English English English
Published:	Emerald 2019
Subjects:	HG4501 Stocks, investment, speculation
Online Access:	http://irep.iium.edu.my/67776/ http://irep.iium.edu.my/67776/ http://irep.iium.edu.my/67776/ http://irep.iium.edu.my/67776/7/67776_%20Information%20content%20and%20informativeness%20of%20analysts%E2%80%99%20report.pdf http://irep.iium.edu.my/67776/13/67776%20Information%20content%20and%20informativeness%20%20WOS.pdf http://irep.iium.edu.my/67776/19/67776_Information%20content%20and%20informativeness_SCOPUS.pdf

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recordtype	eprints
spelling	iium-677762019-06-24T03:49:24Z http://irep.iium.edu.my/67776/ Information content and informativeness of analysts’ report: evidence from Malaysia Mohd Thas Thaker, Hassanudin Mohamad, Azhar Mustaffa Kamil, Nazrol Kamil Duasa, Jarita HG4501 Stocks, investment, speculation Purpose This study aims to document the influence of information content and the informativeness of analyst reports towards cumulative abnormal return (CAR) in the Malaysian market. Design/methodology/approach Samples of analyst reports for the period 2010, January 4th until 2015, December 24th were collected from the Bursa Malaysia’s repository system for daily basis information. The study employs market adjusted method for the calculation of CAR and panel regression to test the research objective. In addition, diagnostic tests which include the Variance Inflation Factor (VIF), correlation analysis, heteroscedasticity tests, serial auto-correlation and the Hausman test were also performed to ensure the validity and reliability of the data. Findings Result from the unbalanced panel data reveals that not all of the information contained in the analyst reports are able to detect stock returns movement. Only five variables are shown to have strong association with the returns, and these are; target price, earnings forecast, return on equity, cash flows to price, and sales to price ratio. The R-Square value has also been shown to be relatively low (0.79%), indicating the low predictive power of information content and the informativeness of the analyst report in explaining stock returns. In order to support the findings based on the knowledge obtained, a descriptive analysis on whether the analyst reports were able to predict the recommendation accurately or not was performed. Result from the descriptive analysis shows that only 57 percent of the recommendations are accurate, evidenced by the differing target price and ending price. This outcome appears to contradict the theory of signalling hypothesis. Hence, it can be concluded that analyst reports have less informational role among investors Originality/value This paper has thus provided insight into how information disclosed in the analyst report influence the return of stocks, further extending the limited research on analyst report in the context of Malaysian market. The paper has also added to the existing literature by providing several implications to practitioners and researchers alike. Emerald 2019-01-01 Article PeerReviewed application/pdf en http://irep.iium.edu.my/67776/7/67776_%20Information%20content%20and%20informativeness%20of%20analysts%E2%80%99%20report.pdf application/pdf en http://irep.iium.edu.my/67776/13/67776%20Information%20content%20and%20informativeness%20%20WOS.pdf application/pdf en http://irep.iium.edu.my/67776/19/67776_Information%20content%20and%20informativeness_SCOPUS.pdf Mohd Thas Thaker, Hassanudin and Mohamad, Azhar and Mustaffa Kamil, Nazrol Kamil and Duasa, Jarita (2019) Information content and informativeness of analysts’ report: evidence from Malaysia. Journal of Financial Reporting and Accounting, 16 (4). pp. 742-763. ISSN 1985-2517 https://www.emeraldinsight.com/doi/abs/10.1108/JFRA-09-2017-0087 https://doi.org/10.1108/JFRA-09-2017-0087
repository_type	Digital Repository
institution_category	Local University
institution	International Islamic University Malaysia
building	IIUM Repository
collection	Online Access
language	English English English
topic	HG4501 Stocks, investment, speculation
spellingShingle	HG4501 Stocks, investment, speculation Mohd Thas Thaker, Hassanudin Mohamad, Azhar Mustaffa Kamil, Nazrol Kamil Duasa, Jarita Information content and informativeness of analysts’ report: evidence from Malaysia
description	Purpose This study aims to document the influence of information content and the informativeness of analyst reports towards cumulative abnormal return (CAR) in the Malaysian market. Design/methodology/approach Samples of analyst reports for the period 2010, January 4th until 2015, December 24th were collected from the Bursa Malaysia’s repository system for daily basis information. The study employs market adjusted method for the calculation of CAR and panel regression to test the research objective. In addition, diagnostic tests which include the Variance Inflation Factor (VIF), correlation analysis, heteroscedasticity tests, serial auto-correlation and the Hausman test were also performed to ensure the validity and reliability of the data. Findings Result from the unbalanced panel data reveals that not all of the information contained in the analyst reports are able to detect stock returns movement. Only five variables are shown to have strong association with the returns, and these are; target price, earnings forecast, return on equity, cash flows to price, and sales to price ratio. The R-Square value has also been shown to be relatively low (0.79%), indicating the low predictive power of information content and the informativeness of the analyst report in explaining stock returns. In order to support the findings based on the knowledge obtained, a descriptive analysis on whether the analyst reports were able to predict the recommendation accurately or not was performed. Result from the descriptive analysis shows that only 57 percent of the recommendations are accurate, evidenced by the differing target price and ending price. This outcome appears to contradict the theory of signalling hypothesis. Hence, it can be concluded that analyst reports have less informational role among investors Originality/value This paper has thus provided insight into how information disclosed in the analyst report influence the return of stocks, further extending the limited research on analyst report in the context of Malaysian market. The paper has also added to the existing literature by providing several implications to practitioners and researchers alike.
format	Article
author	Mohd Thas Thaker, Hassanudin Mohamad, Azhar Mustaffa Kamil, Nazrol Kamil Duasa, Jarita
author_facet	Mohd Thas Thaker, Hassanudin Mohamad, Azhar Mustaffa Kamil, Nazrol Kamil Duasa, Jarita
author_sort	Mohd Thas Thaker, Hassanudin
title	Information content and informativeness of analysts’ report: evidence from Malaysia
title_short	Information content and informativeness of analysts’ report: evidence from Malaysia
title_full	Information content and informativeness of analysts’ report: evidence from Malaysia
title_fullStr	Information content and informativeness of analysts’ report: evidence from Malaysia
title_full_unstemmed	Information content and informativeness of analysts’ report: evidence from Malaysia
title_sort	information content and informativeness of analysts’ report: evidence from malaysia
publisher	Emerald
publishDate	2019
url	http://irep.iium.edu.my/67776/ http://irep.iium.edu.my/67776/ http://irep.iium.edu.my/67776/ http://irep.iium.edu.my/67776/7/67776_%20Information%20content%20and%20informativeness%20of%20analysts%E2%80%99%20report.pdf http://irep.iium.edu.my/67776/13/67776%20Information%20content%20and%20informativeness%20%20WOS.pdf http://irep.iium.edu.my/67776/19/67776_Information%20content%20and%20informativeness_SCOPUS.pdf
first_indexed	2023-09-18T21:36:13Z
last_indexed	2023-09-18T21:36:13Z
_version_	1777412838197821440

Information content and informativeness of analysts’ report: evidence from Malaysia

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