The frequency and magnitude of restructuring charges have drawn the attention of various groups of users of accounting information. Prior studies on restructuring charges have focused on the market's response to the announcement of the charge. In contrast, we examine the charges from the perspective of financial analysts. We provide evidence that analysts expect declining performance for restructuring firms in the short run but possible improvement over the longer term. When we examine forecast errors in the year following the charge, we find evidence that the analysts’ accuracy has declined and, despite the downward revision, analysts are still optimistically biased.

We document that the quality of earnings reported by politically connected firms is significantly poorer than that of similar non-connected companies. Our results are not due to firms with ex-ante poor earnings quality establishing connections more often. Instead, our results suggest that, because of a lesser need to respond to market pressures to increase the quality of information, connected companies can afford disclosing lower quality accounting information. In particular, lower quality reported earnings is associated with a higher cost of debt only for the non-politically connected firms in the sample.