Who’s heard on the Street? Determinants and consequences of financial analyst coverage in the business press

Review of Accounting Studies

Volumn 20, Issue 1, 2015, Pages 173-209

  Rees, Lynn ^a   Sharp, Nathan ^a   Twedt, Brady ^b  

^a TEXAS A AND M UNIVERSITY   (United States)

^b INDIANA UNIVERSITY   (United States)

Author keywords

Analyst career outcomes; Business press; Capital markets; Financial analysts

Indexed keywords

EID: 84939896145     PISSN: 13806653     EISSN: 15737136     Source Type: Journal    
DOI: 10.1007/s11142-014-9298-3     Document Type: Article

References (67)

1. Agrawal, A., & Chen, M. (2008). Do analyst conflicts matter? Evidence from stock recommendations. Journal of Law and Economics,51, 503–537.
2. Barber, B., & Odean, T. (2008). All that glitters: The effect of attention and news on the buying behavior of individual and institutional investors. Review of Financial Studies,21, 785–818.
3. Beyer, A., Cohen, D., Lys, T., & Walther, B. (2010). The financial reporting environment: Review of the recent literature. Journal of Accounting and Economics,50, 296–343.
4. Bonner, S., Hugon, A., & Walther, B. (2007). Investor reaction to celebrity analysts: The case of earnings forecast revisions. Journal of Accounting Research,45, 481–513.
5. Brown, L., Call, A., Clement, M., & Sharp, N. (2013). Inside the ‘black box’ of sell-side financial analysts. Working paper, Temple University, Arizona State University, University of Texas at Austin, Texas A&M University.
6. Bushee, B., Core, J., Guay, W., & Hamm, S. (2010). The role of the business press as an information intermediary. Journal of Accounting Research,48, 1–19.
7. Call, A., Chen, S., & Tong, Y. (2009). Are analysts’ earnings forecasts more accurate when accompanied by cash flow forecasts? Review of Accounting Studies,14, 358–391.
8. Chan, W. (2003). Stock price reaction to news and no-news: Drift and reversal after headlines. Journal of Financial Economics,70, 223–260.
9. Clement, M. (1999). Analyst forecast accuracy: Do ability, resources, and portfolio complexity matter? Journal of Accounting and Economics,27, 285–303.
10. Clement, M., Rees, L., & Swanson, E. (2003). The influence of culture and corporate governance on the characteristics that distinguish superior analysts. Journal of Accounting, Auditing, and Finance,18, 593–618.
11. Clement, M., & Tse, S. (2003). Do investors respond to analysts’ forecast revisions as if forecast accuracy is all that matters? The Accounting Review,78, 227–249.
12. Clement, M., & Tse, S. (2005). Financial analyst characteristics and herding behavior in forecasting. Journal of Finance,60, 307–341.
13. Clement, M., & Westphal, J. (2008). Sociopolitical dynamics in relations between top managers and security analysts: Favor rendering, reciprocity, and analyst stock recommendations. Academy of Management Journal,51, 873–897.
14. Cliff, M., & Denis, D. (2004). Do initial public offering firms purchase analyst coverage with underpricing? Journal of Finance,59, 2871–2901.
15. Core, J., Guay, W., & Larcker, D. (2008). The power of the pen and executive compensation. Journal of Financial Economics,88, 1–25.
16. Das, S., Levine, C., & Sivaramakrishnan, K. (1998). Earnings predictability and bias in analysts’ earnings forecasts. The Accounting Review,73, 277–294.
17. Drake, M., & Myers, L. (2011). Analysts’ accrual-related over-optimism: Do analyst characteristics play a role? Review of Accounting Studies,16, 59–88.
18. Dyck, A., Volchkova, N., & Zingales, L. (2008). The corporate governance role of the media: Evidence from Russia. Journal of Finance,63, 1093–1135.
19. Dyck, A., & Zingales, L. (2003). The bubble and the media. In Peter Cornelius & Bruce Kogut (Eds.), Corporate governance and capital flows in a global economy. Oxford and New York: Oxford University Press.
20. Emery, D. R., & Li, X. (2009). Are the Wall Street analyst rankings popularity contests? Journal of Financial and Quantitative Analysis,44, 411–437.
21. Engelberg, J., & Parsons, C. (2011). The causal impact of media in financial markets. Journal of Finance,66, 67–97.
22. Ertimur, Y., Sunder, J., & Sunder, S. (2007). Measure for measure: The relation between forecast accuracy and recommendation profitability of analysts. Journal of Accounting Research,45, 567–606.
23. Fang, L., & Peress, J. (2009). Media coverage and the cross-section of stock returns. Journal of Finance,64, 2023–2052.
24. Fang, L., & Yasuda, A. (2009). The effectiveness of reputation as a disciplinary mechanism in sell-side research. Review of Financial Studies,22, 3735–3777.
25. Fang, L., & Yasuda, A. (2014). Are stars’ opinions worth more? The relation between analyst reputation and recommendation values. Journal of Financial Services Research (forthcoming).
26. Francis, J., & Soffer, L. (1997). The relative informativeness of analysts’ stock recommendations and earnings forecast revisions. Journal of Accounting Research,35, 193–211.
27. Gaa, C. (2009). Asymmetric attention to good and bad news and the neglected firm effect in stock returns. Working paper, University of Oregon.
28. Groysberg, B. (2010). Chasing stars: The myth of talent and the portability of performance. Princeton, NJ: Princeton University Press.
29. Groysberg, B., Healy, P., & Maber, D. (2011). What drives sell-side analyst compensation at high-status investment banks? Journal of Accounting Research,49, 969–1000.
30. Hamilton, J., & Zeckhauser, R. (2004). Media coverage of CEOs: Who? what? where? when? why? Working paper, Harvard University, Duke University.
31. Harrington, D. (1989). Economic news on television: The determinants of coverage. Public Opinion Quarterly,53, 17–40.
32. Hong, H., & Kubik, J. (2003). Analyzing the analysts: Career concerns and biased earnings forecasts. Journal of Finance,58, 313–351.
33. Hong, H., Kubik, J. D., & Solomon, A. (2000). Security analysts’ career concerns and herding of earnings forecasts. RAND Journal of Economics,31, 121–144.
34. Huberman, G., & Regev, T. (2001). Contagious speculation and a cure for cancer: A nonevent that made stock prices soar. Journal of Finance,56, 387–396.
35. Jacob, J., Lys, T., & Neale, M. (1999). Expertise in forecasting performance of security analysts. Journal of Accounting and Economics,28, 51–82.
36. Johnson, S., Ryan, H., & Tian, Y. (2009). Managerial incentives and corporate fraud: The sources of incentives matter. Review of Finance,13, 115–145.
37. Kadan, O., Madureira, L., Wang, R., & Zach, T. (2009). Conflicts of interest and stock recommendations: The effects of the global settlement and related regulations. Review of Financial Studies,22, 4189–4217.
38. Kothari, S. P., Li, X., & Short, J. (2009). The effect of disclosures by management, analysts, and business press on cost of capital, return volatility, and analyst forecasts: A study using content analysis. The Accounting Review,84, 1639–1670.
39. Krigman, L., Shaw, W., & Womack, K. (2001). Why do firms switch underwriters? Journal of Financial Economics,60, 245–284.
40. Leone, A., & Wu, J. (2007). What does it take to become a superstar? Evidence from Institutional Investor rankings of financial analysts. Working paper, University of Miami, University of Rochester.
41. Li, Y., Rau, P., & Xu, J. (2009). The five stages of analyst careers: Coverage choices and changing influence. Working paper, University of Purdue.
42. Libby, R., Hunton, J., Tan, H., & Seybert, N. (2008). Relationship incentives and the optimistic/pessimistic pattern in analysts’ forecasts. Journal of Accounting Research,46, 173–198.
43. Lin, H., & McNichols, M. (1998). Underwriting relationships, analysts’ earnings forecasts and investment recommendations. Journal of Accounting and Economics,25, 101–127.
44. Loh, R., & Stulz, R. (2011). When are analyst recommendation changes influential? Review of Financial Studies,24, 593–627.
45. Manski, C., & Lerman, S. (1977). The estimation of choice probabilities from choice based samples. Econometrica,45, 1977–1988.
46. Mayew, W. (2008). Evidence of management discrimination among analysts during earnings conference calls. Journal of Accounting Research,46, 627–659.
47. Mayew, W., Sharp, N., & Venkatachalam, M. (2013). Are there private information benefits to participating in a public earnings conference call? Review of Accounting Studies,18, 386–413.
48. Merton, R. (1987). A simple model of capital market equilibrium with incomplete information. Journal of Finance,42, 483–510.
49. Miller, G. (2006). The press as a watchdog for accounting fraud. Journal of Accounting Research,44, 1001–1033.
50. Morgan, J., & Stocken, P. (2003). An analysis of stock recommendations. RAND Journal of Economics,34, 183–203.
51. Nguyen, B. D. (2011). Is more news good news? Media coverage of CEOs, firm value, and rent extraction. Working paper, University of Cambridge.
52. Palepu, K. (1986). Predicting takeover targets: A methodological and empirical analysis. Journal of Accounting and Economics,8, 3–35.
53. Phillips, D., & Zuckerman, E. (2001). Middle-status conformity: Theoretical restatement and empirical demonstration in two markets. The American Journal of Sociology,107, 379–429.
54. Ramnath, S., Rock, S., & Shane, P. (2008). Financial analysts’ forecasts and stock recommendations: A review of the research. Foundations and Trends in Finance,2, 311–420.
55. Reingold, D., & Reingold, J. (2006). Confessions of a Wall Street analyst: A true story of inside information and corruption in the stock market. New York: HarperCollins.
56. Schmitz, P. (2007). Market and individual investors’ reactions to corporate news in the media. Working paper, University of Mannheim.
57. Soroka, S. (2006). Good news and bad news: Asymmetric responses to economic information. Journal of Politics,68, 372–385.
58. Stickel, S. (1992). Reputation and performance among security analysts. Journal of Finance,47, 1811–1836.
59. Tetlock, P. (2007). Giving content to investor sentiment: The role of media in the stock market. Journal of Finance,62, 1139–1168.
60. Tetlock, P. (2011). All the news that’s fit to reprint: Do investors react to stale information? Review of Financial Studies,45, 1481–1512.
61. Tetlock, P., Saar-Tsechansky, M., & Macskassy, S. (2008). More than words: Quantifying language to measure firms’ fundamentals. Journal of Finance,63, 1437–1467.
62. Twedt, B. (2013). Spreading the word: Price discovery and newswire dissemination of management earnings guidance. Working paper, Indiana University.
63. Vega, C. (2006). Stock price reaction to public and private information. Journal of Financial Economics,82, 103–133.
64. White, H. (1980). A heteroscedasticity-consistent covariance matrix estimator and a direct test for heteroscedasticity. Econometrica,48, 817–838.
65. Winchell, J. (2010). When do negative arguments increase the credibility of favorable analyst reports? Working paper, University of South Carolina.
66. Womack, K. (1996). Do brokerage analysts’ recommendations have investment value? Journal of Finance,1, 137–167.
67. Wu, J., & Zang, A. (2009). What determines financial analysts’ career outcomes during mergers? Journal of Accounting and Economics,47, 59–86.