Analyst following and institutional ownership.Working Paper # 629 PDF Download
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Author: Patricia C. O'Brien and Ravi Bhushan
Publisher:
ISBN:
Category :
Languages : en
Pages : 28
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Author: Patricia C. O'Brien and Ravi Bhushan
Publisher:
ISBN:
Category :
Languages : en
Pages : 28
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Book Description
Author: Bobae Choi
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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This paper examines the role of sophisticated investors in pricing future earnings. Using the future earnings response coefficient (FERC) model recently developed by Ettredge et al. (2005), we test the effect of analyst following and institutional ownership on the informativeness of stock returns on future earnings. We find that the informativeness of stock returns on future earnings, measured as the future earnings response coefficient, increases with the analyst following and institutional investors. We also investigate how the recently introduced Regulation Fair Disclosure in Korea affects the informativeness of stock returns on future earnings and its relation with analyst following and institutional investors. The results show that the regulation decreases the future earnings response coefficient in general and its relation with the analyst following, suggesting that their superior ability is impaired after the regulation. Our main results do not change much after controlling for the change in analyst following after the regulation and additional variables such as firm size, growth, earnings variability and accounting conservatism.
Author: Chitru S. Fernando
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Author: Igor Kadach
Publisher:
ISBN:
Category :
Languages : en
Pages : 52
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We study the effect of institutional ownership on firm coverage by equity analysts. To account for the endogeneity of institutional ownership we employ instrumental variable approach. Acquisition for cash of a company from an institutional investor's portfolio serves as an exogenous shock to the institutional ownership of other firms held by this institution. Contrary to prior studies, we document a negative effect of institutional ownership on analysts' coverage. However, this effect varies with initial analysts' following. Consistent with the theory of limited attention institutional ownership increases analysts' following for companies with low initial coverage and decrease it for companies with high initial coverage. Overall, our findings highlight the role of company's ownership structure in analysts' decision to follow the firm.
Author: Benjamin C. Ayers
Publisher:
ISBN:
Category :
Languages : en
Pages : 32
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This paper presents evidence that prices of firms followed by sell-side analysts and favored by institutional investors incorporate future earnings earlier than prices of other firms. Our tests are based on regressions of year t abnormal returns on earnings changes from years t-1, t, and t+1. We find that lead coefficients for firms most heavily followed by analysts or favored by institutions are greater than lead coefficients for firms with little analyst following or institutional holdings. In contrast, contemporaneous coefficients for analyst and institutional favorites are less than contemporaneous coefficients for other firms. Furthermore, the results for analysts and institutions are incremental to each other. In addition, neither effect is due to the fact that price leads are an increasing function of firm size.One possible explanation for our results is that market professionals are more skilled than other investors in analyzing publicly available information. Alternatively, the positive association between price leads and professional interest may exist only because management provides more detailed information to sell-side and buy-side analysts than to individual investors. This possibility prompted the SEC to issue Regulation FD, which creates a more level playing field for all investors by eliminating selective disclosures. Our results, which are based on data prior to the passage of Regulation FD, suggest that the quot;distribution gainquot; sought by the SEC may come with an quot;allocation cost.quot; That is, if Regulation FD causes management to reduce the flow of information to market professionals, the length of price leads could be shortened.
Author: Patricia C. O'Brien
Publisher:
ISBN:
Category :
Languages : en
Pages : 21
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Author: Xia Chen
Publisher:
ISBN:
Category :
Languages : en
Pages : 51
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Prior studies document that institutional investors outperform the market. We investigate whether this superior performance is partly derived from institutional investors' use of sell-side analysts' stock recommendations. First, we find that the quarterly change in institutional ownership is positively correlated with consensus recommendations. After controlling for other determinants of institutional holdings, the quarterly change in institutional ownership is on average 0.90% higher for firms with favorable recommendations than for those with unfavorable recommendations. Second, using large trades to proxy for institutional trading, we find that there are more buyer-initiated than seller-initiated large trades around favorable recommendations and vice versa for unfavorable recommendations. Lastly, we find that the change in institutional ownership that is explained by stock recommendations is associated with positive abnormal returns in the future, about 4.2% per year. Overall, these results indicate that institutional investors trade upon stock recommendations and such trading contributes to their superior performance.
Author: Alexander Ljungqvist
Publisher:
ISBN:
Category :
Languages : en
Pages : 48
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Because sell-side analysts are dependent on institutional investors for performance ratings and trading commissions, we argue that analysts are less likely to succumb to investment banking or brokerage pressure in stocks highly visible to institutional investors. Examining a comprehensivesample of analyst recommendations over the 1994-2000 period, we find that analysts recommendations relative to consensus are positively associated with investment bankingrelationships and brokerage pressure, but negatively associated with the presence of institutional investor owners. The presence of institutional investors is also associated with more accurate earnings forecasts and more timely re-ratings following severe share price falls.
Author: Joshua Ronen
Publisher: Springer Science & Business Media
ISBN: 0387257713
Category : Business & Economics
Languages : en
Pages : 587
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Book Description
This book is a study of earnings management, aimed at scholars and professionals in accounting, finance, economics, and law. The authors address research questions including: Why are earnings so important that firms feel compelled to manipulate them? What set of circumstances will induce earnings management? How will the interaction among management, boards of directors, investors, employees, suppliers, customers and regulators affect earnings management? How to design empirical research addressing earnings management? What are the limitations and strengths of current empirical models?
Author: Yasuyuki Fuchita
Publisher: Brookings Institution Press
ISBN: 0815729820
Category : Business & Economics
Languages : en
Pages : 216
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Book Description
A Brookings Institution Press and Nomura Institute of Capital Markets Research publication Developed country capital markets have devised a set of institutions and actors to help provide investors with timely and accurate information they need to make informed investment decisions. These actors have become known as "financial gatekeepers" and include auditors, financial analysts, and credit rating agencies. Corporate financial reporting scandals in the United States and elsewhere in recent years, however, have called into question the sufficiency of the legal framework governing these gatekeepers. Policymakers have since responded by imposing a series of new obligations, restrictions, and punishments—all with the purpose of strengthening investor confidence in these important actors. Financial Gatekeepers provides an in-depth look at these new frameworks, especially in the United States and Japan. How have they worked? Are further refinements appropriate? These are among the questions addressed in this timely and important volume. Contributors include Leslie Boni (University of New Mexico), Barry Bosworth (Brookings Institution), Tomoo Inoue (Seikei University), Zoe-Vonna Palmrose (University of Southern California), Frank Partnoy (University of San Diego School of Law), George Perry (Brookings Institution), Justin Pettit (UBS), Paul Stevens (Investment Company Institute), Peter Wallison (American Enterprise Institute).
