Does Form Affect Analysts' Reactions to Earnings Preannouncements?

We conduct two experiments which demonstrate that the effect of earnings preannouncement bias on analyst forecasts depends on the form of the preannouncement and that the effect of preannouncement form does not become evident until the release of the actual earnings announcement. Preannouncement form (point, narrow range, wide range) has no effect on forecasts made immediately after the preannouncement. However, after the actual earnings announcement, the effect of preannouncement bias on analysts' reforecasts is magnified by a narrow range and reduced by a wide range, compared to a point estimate. These results suggest that treating range preannouncements and forecasts as equivalent to point estimates equal to the mean of the range, assuming that ranges of varying widths will trigger similar responses, and failing to consider behavioral effects after the release of actual earnings may paint an incomplete picture of how preannouncements and other forecasts affect analysts and investors.