Catering behaviors in corporate digitization disclosures: Identification and analyst forecast accuracy loss

• Published in: Research in international business and finance 2024-01, Vol.68, p.102201, Article 102201
• Main Authors: Zhou, Bole, Ma, Lili, Yang, Shenghao
• Format: Article
• Language: English
• Subjects: Analyst forecast accuracy; Catering behavior; Corporate digitization disclosure
• ISSN: 0275-5319; 1878-3384
• DOI: 10.1016/j.ribaf.2023.102201

This paper identifies the catering behaviors in corporate digitization disclosures (CDD) and examines their effects on analyst forecast accuracy. By creating a peer-relative catering behavior score, we measure the extent to which firms cater to investors and provide evidence that catering behaviors in CDD decrease the improvement effect of CDD on analyst forecast accuracy. We further find that catering behaviors reduce the improvement effect of CDD by decreasing information quality and information comparability. Finally, we document that the reduction effect of catering behaviors is more pronounced in firms with poor information environment and firms followed by fewer expert analysts. Overall, our findings are consistent with the argument that narrative disclosures can be used both to reduce information asymmetry and to cater to investor demand. [Display omitted] •This paper provides additional evidence on the capital market consequences of corporate digitization disclosures.•This paper adds to the catering literature by focusing on the catering behaviors in narrative disclosures.•This study uses a peer-relative score to empirically measure a firm’s catering behaviors in CDD and test their effects.•Narrative disclosures can be used both to reduce information asymmetry and to cater to investor demand.