Bundling managerial earnings guidance with quarterly earnings announcements (EAs) has become an increasingly common practice. This study investigates the impact of bundled guidance on analysts' forecast revisions. Our findings indicate that analysts respond more to bundled guidance than non‐bundled guidance. This effect increases with analysts' time pressure and cognitive constraints around the EA. Analysts' revisions also incorporate more of the bundled management guidance when accompanied by additional information, such as conference calls. We further find that analysts revise their forecasts more quickly following bundled guidance than non‐bundled guidance. Together, these findings are consistent with the notion that analysts place more weight on bundled guidance than on non‐bundled guidance in their forecast revisions as bundled guidance facilities analysts' timely forecast revisions following EAs. Finally, we find that analysts' forecast revisions following bundled guidance generate significant market reactions. Our findings enhance our understanding of analysts' information processing and shed light on why bundling can be an effective guidance strategy.

We posit that management forecasts, which are predictable transformations of realized earnings without random errors, are more informative than unbiased forecasts, which manifest small but unpredictable errors, even if biased forecasts are less accurate. Consistent with this intuition, we find that managers who make consistent forecasting errors have a greater ability to influence investor reactions and analyst revisions, even after controlling for the effect of accuracy. This effect is more economically significant and statistically robust than that of forecast accuracy. More sophisticated investors and experienced analysts are found to have a better understanding of the benefits of consistent management forecasts.

We analyze whether industry competition influences analyst coverage decisions and whether analysts benefit from covering product market competitors. We find that analysts are more likely to cover a firm when this firm competes with more firms already covered by the analyst. We also find that the intensity of competition among these competitors is additionally important to the coverage decision. Moreover, we find that analysts who cover product market competitors are more likely to obtain analyst star status. These results are consistent with the importance to analysts of industry competition and product market knowledge accumulated through covering product market competitors.