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Customer Value Disclosure and Analyst Forecasts: The Influence of Environmental Dynamism

In this paper, we study the economic benefits of a pro-active disclosure strategy in a dynamic environment. More specifically, we explore the relationships between customer value disclosure, analyst following, and earnings forecasts, taking into account environmental dynamism as captured by R&D intensity, sales variability and competition. Controlling for endogeneity, we rely on regression estimations to test the hypotheses. First, results show that customer value disclosure is positively associated with analyst following and consensus in analyst earning forecasts. Second, environmental dynamism enhances the association between customer value disclosure and analyst following as well as consensus among analysts. Those results suggest that customer metrics attract analysts and improve their ability to forecast earnings. Moreover, customer value disclosure appears particularly relevant for forecasting earnings of firms involved in dynamic environments. Our findings reveal that the relations between customer value disclosure, analyst following and analyst forecasts are not straightforward but are affected by a firm’s environmental uncertainty.