Accounting estimation intensity, analyst following, and earnings forecast properties

We specify two measures of accounting estimation intensity (AEI) based on the textual analysis of the qualitative disclosures in the critical accounting policies (CAP) section of firms' MD&A. We then examine how these measures relate to financial analyst following and earnings forecast properties. Using a narrow dictionary definition of accounting estimates, we find AEI is positively associated with analyst following. It is also associated with increasing levels of private information in analysts' forecasts and the informativeness of analysts' reports when analysts engage in greater scrutiny of accounting estimates. Using a broader definition of accounting estimates yields a statistically significant relation with the informativeness of analysts' reports. Overall, our results are consistent with AEI stimulating investor demand for analysts' services and increasing the informativeness of these services.