CHANGES IN ACCOUNTING POLICIES AND INVESTMENT ANALYSTS FIXATION ON ACCOUNTING FIGURES

This paper describes and explains how investment analysts deal with ch anges in accounting policies. The extent to which analysts appear to b e fixated on accounting figures is examined using their reports about companies that adopted accounting changes In their financial statement s. Sixteen accounting policy changes were identified and divided into four categories and a distinction was made between strong and weak lev els of fixation. Consideration is given to the level of fixation of in vestment analysts that can be explained by the extent of disclosure co ncerning the accounting change, the moment the accounting change is an nounced for the first time, the nature of the accounting change and th e type of employer. The level of disclosure and the nature of accounti ng change are important determinants of fixation, Furthermore, it appe ars that financial journalists explain accounting changes and their ef fects on accounting figures more extensively than investment analysts employed by banks or firms of stockbrokers. This study focuses on inve stment reports in practice in a Dutch context, in contrast to previous research conducted in experimental settings. (C) 1997 Elsevier Scienc e Ltd.