Download or read book Three Essays in Financial Analysts and Corporate Disclosure Using Textual Analysis written by Zhu Chen and published by . This book was released on 2021 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: "The dissertation consists of two essays in financial analysts and one essay in corporate disclosure, all utilizing textual analysis. In the first essay, I decompose analysts’ estimates of weighted average cost of capital (WACC) into abnormal and expected components using a risk characteristic-based model. I find that the abnormal component predicts future stock returns, especially when combined with EPS and dispersion of EPS forecasts. Additional analysis shows that the abnormal component of WACC predicts underlying firms’ future fundamental performance, particularly for experienced analysts and firms with low information intensity. My findings highlight that the abnormal component of analysts’ WACC estimates is informative. Analysts’ decision process to map their forecast inputs such as EPS forecasts and risk assessment to their investment opinions such as target price and recommendation remains to be a black box in the previous literature. In the second essay, I find that analysts’ estimate of WACC is negatively associated with their target price forecasts. It provides empirical evidence that analysts would rationalize the DCF model. From the investor’s perspective, I find that investors generally overreact to the information in WACC estimates when evaluating analysts’ target price forecasts. The extent of the overreaction depends on whether target price changes are conflicted by WACC changes. In light of psychological theories, I provide empirical evidence that when the investors' optimistic verifiable expectation is rejected, they switch to the unverifiable component - WACC for information. At last, I show similar empirical evidence for analyst recommendation.In the third essay, using 4,262 Form 20-F filings from 37 countries, we find that corporate risk-taking is positively associated with managerial expectation as measured by forward-looking statement (FLS) tone, particularly for firms from countries with strong institutions and for FLS tone related to macroeconomics. Our study advances the measure of overall managerial expectations and links it to corporate risk-taking in an international setting"--