Through the eyes of analysts: a content analysis of analyst report narratives

This paper contributes to the ongoing debate of developing corporate reporting practices by analyzing the information content of fundamental analyst reports and comparing this with annual reporting practices. As there has been much critique of the lacking relevance of disclosures through corporate reporting, taking the point of departure in some of the capital market actors that follow companies the closest, namely the sell-side analysts, will reveal which types of information companies should be disclosing through their corporate reports. By focusing on the reports disclosed in connection with the analysts’ fundamental analyses of a company, this paper constitutes an important contribution to business reporting but also to the study of the capital market actors’ perceptions of relevant information. A medium-sized medico-tech company, internationally renowned for its state-of-the-art business reporting, was chosen as the basis for the study. An analysis of the latest fundamental analyst report on this company by each investment bank actively following it was conducted using a content analysis methodology. The results illustrate the extent to which analysts consider certain types of voluntary information as relevant to their analyses and recommendations. The paper shows that background information about the company, i.e. about products, markets and the industry, along with the analysts’ own analysis of financial and operating data account for nearly 55% of the total disclosure in fundamental analyst reports, and the amount of financial data supplied is not related to the other disclosures in the reports. In comparison to business reporting practices, the fundamental analyst reports put relatively less weight on social and sustainability information, intellectual capital and corporate governance information and considerably more emphasis on segment information, opportunities, value drivers and critical success factors