Restructuring Charges Create Analyst Bias.

Analysts who get wind of a company announcing a restructuring charge tend to revise their one- and two-year forecasts downward -- but maybe not by enough, says a new study out of Vanderbilt University. According to the study, "The Effect of Reporting Restructuring Charges on Analysts' Forecast Revisions and Errors," there's also evidence that many companies don't report extensive details, including dollar amounts, of various restructuring items. And the study says analysts' accuracy and bias worsen subsequent to the restructuring charge.

"I've seen companies restructure three times in a five-year period," says co-author Debra C. Jeter. 'Restructuring charges' is a term they use too loosely; a whole lot of stuff gets thrown into this one label. Firms need to be more specific about what they're including, because the market's response depends on the nature of the charges as well as other factors, like management changes."