Anticipation of management forecasts and analysts' private information search

We examine how analysts' anticipation of a management forecast affects their search for private information. Analysts are likely to acquire more private information because of the potential gains from trading on that information before a publicly disclosed management forecast. However, this anticipation may also decrease analysts' efforts, because the information in a management forecast could substitute for costly private information. We predict that higher costs (benefits) of private information acquisition are associated with decreased (increased) private information reflected in analysts' forecasts when a management forecast is anticipated. Consistent with our predictions, we find that analysts acquire less private information before an anticipated forecast when earnings are more volatile and that they acquire more private information when the management forecast date is highly predictable and when the forecast is expected to be very accurate. We also find that star analysts acquire more private information before an anticipated forecast.