Journal ArticleDOI
Do Analysts Follow Managers that Switch Companies? An Analysis of Relations in the Capital Markets
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In this article, the authors examine the importance of professional relationships developed between analysts and managers by investigating analyst coverage decisions in the context of CEO and CFO moves between publicly listed firms.Abstract:
We examine the importance of professional relationships developed between analysts and managers by investigating analyst coverage decisions in the context of CEO and CFO moves between publicly listed firms. We find that top executive moves from an origin firm to a destination firm trigger analysts following the origin firm to initiate coverage of the destination firm in 10% of our sample, which is significantly higher than in a matched sample. Analyst-manager “co-migration” is significantly stronger when both firms are within the same industry. Analysts who move with managers to the destination firm exhibit more intense and accurate coverage of the origin firm than they do in other firms and compared to other analysts covering the origin firm. The advantage no longer holds after the executive’s departure, and most of the analysts’ advantage does not carry over to the destination firm. However, the analysts do increase the overall market capitalization of firms in their coverage portfolio. Our results hold after Regulation Fair Disclosure, suggesting that these relationships are not based on selective disclosure. Overall, the evidence shows both the importance and limitations of professional relations in capital markets.read more
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Propensity Score Matching in Accounting Research
TL;DR: Propensity score matching (PSM) has become a popular technique for estimating average treatment effects (ATEs) in accounting research, but studies often oversell the capabilities of PSM, fail to disclose important design choices, and/or implement PSM in a theoretically inconsistent manner.
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Local Bias in Google Search and the Market Response around Earnings Announcements
TL;DR: The authors examined the impact of distance on internet search behavior and found that firms with higher local bias in search experience higher bid-ask spreads, lower trading volumes, and lower earnings response coefficients at the time of earnings announcements.
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Personal Lending Relationships
TL;DR: In this paper, the authors identify the effects of personal relationships on loan contracting using executive deaths and retirements at other firms as a source of exogenous variation in executive turnover and find that borrowers choose lenders with which their new executive's have personal relationships 4.1 times as frequently and loans from these lenders have 20 basis points lower spreads and 12.5% larger amounts.
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Are All Independent Directors Equally Informed? Evidence Based on Their Trading Returns and Social Networks
TL;DR: It is found that independent directors socially connected to their firms' senior executives earn significantly higher returns than unconnected independent directors in stock sales transactions.
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Analysts’ Forecasts and Asset Pricing: A Survey
TL;DR: This paper reviewed the literature on sell-side analysts' forecasts and its implications for asset pricing and concluded that analysts' forecast exhibit predictable biases and the market appears to underreact to the information in forecasts and not fully filter the biases in the forecasts.
References
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Upper Echelons: The Organization as a Reflection of Its Top Managers
TL;DR: In this article, the authors synthesize these previously fragmented literatures around a more general "upper echelons perspective" and claim that organizational outcomes (strategic choices and performance levels) are partially predicted by managerial background characteristics.
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Managing with Style: The Effect of Managers on Firm Policies
TL;DR: In this paper, the authors investigate whether and how individual managers affect corporate behavior and performance and show that managers with higher performance effects receive higher compensation and are more likely to be found in better governed environments.
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Taking Stock of Networks and Organizations: A Multilevel Perspective
TL;DR: The central argument of network research is that actors are embedded in networks of interconnected social relationships that offer opportunities for and constraints on behavior as discussed by the authors, and the authors of this paper review the antecedents and consequences of networks at the interpersonal, interunit, and interorganizational levels of analysis, evaluate recent theoretical and empirical trends, and give directions for future research.
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Stock Performance and Intermediation Changes Surrounding Sustained Increases in Disclosure
TL;DR: In this article, the authors investigated whether firms benefit from expanded voluntary disclosure by examining changes in capital market factors associated with increases in analyst disclosure ratings for 97 firms and found that expanded disclosure leads investors to revise upward valuations of the sample firms' stocks, increases stock liquidity, and creates additional institutional and analyst interest in the stocks.
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Firm characteristics and analyst following
TL;DR: This paper examined the major determinants of the number of analysts following a firm and proposed a simple model of analyst following and several firm characteristics are suggested that are likely to influence the extent of a firm's analyst following by either affecting the aggregate demand for or supply of analyst services or both for the firm.