Monitors or Predators: The Influence of Institutional Investors on Sell-Side Analysts

2012 ◽  
Vol 88 (1) ◽  
pp. 137-169 ◽  
Author(s):  
Zhaoyang Gu ◽  
Zengquan Li ◽  
Yong George Yang
Keyword(s):  
Mutual Fund ◽  
Institutional Investors ◽  
Direct Evidence ◽  
Financial Analysts ◽  
Data Availability ◽  
Stock Recommendations ◽  
Analyst Bias ◽  
The Relationship ◽  
Unique Dataset

ABSTRACT: Regulators and the investment community have been concerned that institutional investors pressure financial analysts through trading commission fees to issue optimistic opinions in support of their stock positions. We use a unique dataset that identifies mutual fund companies' allocation of trading commission fees to individual brokerages and provide direct evidence on this issue. In particular, we show that for stocks in which the fund companies have taken large positions, analysts are more optimistic in their stock recommendations when their brokerages receive trading commission fees from these fund companies. The relationship is stronger when the commission fee pressure is greater. The market reacts less favorably to the “Strong Buy” recommendations of analysts facing greater commission fee pressure. The funds also respond negatively to such recommendations in making portfolio adjustments. These results point to a source of analyst bias that has been little explored in the literature. Data Availability: The data are publically available from the sources identified in the paper.

Concurrent Earnings Announcements and Analysts' Information Production

2019 ◽  
Vol 95 (1) ◽  
pp. 165-189 ◽  
Author(s):  
Matthew Driskill ◽  
Marcus P. Kirk ◽  
Jennifer Wu Tucker
Keyword(s):  
Earnings Announcements ◽  
Financial Analysts ◽  
Earnings Forecasts ◽  
Data Availability ◽  
Limited Attention ◽  
Conference Calls ◽  
Stock Recommendations ◽  
Rich Information ◽  
Sample Firm ◽  
Jel Classifications

ABSTRACT We examine whether financial analysts are subject to limited attention. We find that when analysts have another firm in their coverage portfolio announcing earnings on the same day as the sample firm (a “concurrent announcement”), they are less likely to issue timely earnings forecasts for the sample firm's subsequent quarter than analysts without a concurrent announcement. Among the analysts who issue timely earnings forecasts, the thoroughness of their work decreases as their number of concurrent announcements increases. In addition, analysts are more sluggish in providing stock recommendations and less likely to ask questions in earnings conference calls as their number of concurrent announcements increases. Moreover, when analysts face concurrent announcements, they tend to allocate their limited attention to firms that already have rich information environments, leaving behind firms in need of attention. Overall, our evidence suggests that even financial analysts, who serve as information specialists, are subject to limited attention. JEL Classifications: G10; G11; G17; G14. Data Availability: Data are publicly available from the sources identified in the paper.

Friends in Need Are Friends Indeed: An Analysis of Social Ties between Financial Analysts and Mutual Fund Managers

2018 ◽  
Vol 94 (1) ◽  
pp. 153-181 ◽  
Author(s):  
Zhaoyang Gu ◽  
Zengquan Li ◽  
Yong George Yang ◽  
Guangqing Li
Keyword(s):  
Mutual Fund ◽  
Social Ties ◽  
Financial Analysts ◽  
Data Availability ◽  
Fund Manager ◽  
Mutual Fund Managers ◽  
Business Decisions ◽  
The Public ◽  
Fund Managers ◽  
Jel Classifications

ABSTRACT We examine how hometown, school, and workplace ties between financial analysts and mutual fund managers affect their business decisions. We show that a fund manager is more likely to hold stocks covered by analysts with whom she is socially connected, and that she also makes higher profits from these holdings. Such social tie-related holding returns are higher among more opaque firms. In return, a fund manager tends to cast her star analyst votes in favor of her connected analysts, and her fund company is more likely to allocate trading commissions to her connected analysts' brokerages. Additional tests indicate that analysts more actively acquire information (through conducting corporate site visits) and issue more optimistically biased recommendations for stocks held by fund managers with whom they are connected. Overall, our results illustrate the pronounced influence of social networks on the behaviors of analysts and fund managers. JEL Classifications: G10; G23; M40. Data Availability: Data are available from the public sources cited in the text.

Can External Monitoring Affect Corporate Financial Reporting and Disclosure? Evidence from Earnings and Expectations Management

2014 ◽  
Vol 28 (3) ◽  
pp. 529-559 ◽  
Author(s):  
Alfred Zhu Liu
Keyword(s):  
Financial Reporting ◽  
Institutional Investors ◽  
Financial Analysts ◽  
Data Availability ◽  
Analyst Following ◽  
Investment Style ◽  
External Monitoring ◽  
Expectations Management ◽  
Reported Earnings ◽  
Corporate Financial Reporting

SYNOPSIS This study examines whether financial analysts and institutional investors play a disciplinary role in monitoring corporate financial reporting and disclosure. Using a sample of firms that meet or marginally beat analysts' forecasts, likely through upward earnings management and downward expectations management, this study shows that managers' use of the two tactics is associated with monitoring measures, including analyst following, analyst experience and independence, institutional ownership, and institutional investors' experience and investment style. Managers under more effective monitoring by analysts and institutional investors are more likely to manage expectations downward than to manage earnings upward. Overall, the findings are consistent with financial analysts and institutional investors playing a monitoring role in constraining distortions in reported earnings and inducing timely disclosure of bad news. Data Availability: All data are from public sources.

External Investigators' Follow-Up Intentions When Whistleblowers Report Healthcare Fraud: The Effects of Report Anonymity and Previous Confrontation

2020 ◽  
Vol 32 (2) ◽  
pp. 91-101
Author(s):  
Steven E. Kaplan ◽  
Danny Lanier ◽  
Kelly R. Pope ◽  
Janet A. Samuels
Keyword(s):  
Experimental Study ◽  
Early Detection ◽  
Data Availability ◽  
Medical Provider ◽  
Perceived Credibility ◽  
The Relationship ◽  
Critical Investigation

ABSTRACT Whistleblowing reports, if properly investigated, facilitate the early detection of fraud. Although critical, investigation-related decisions represent a relatively underexplored component of the whistleblowing process. Investigators are responsible for initially deciding whether to follow-up on reports alleging fraud. We report the results of an experimental study examining the follow-up intentions of highly experienced healthcare investigators. Participants, in the role of an insurance investigator, are asked to review a whistleblowing report alleging billing fraud occurring at a medical provider. Thus, participants are serving as external investigators. In a between-participant design, we manipulate the report type and whether the caller previously confronted the wrongdoer. We find that compared to an anonymous report, a non-anonymous report is perceived as more credible and follow-up intentions stronger. We also find that perceived credibility fully mediates the relationship between report type and follow-up intentions. Previous confrontation is not significantly associated with either perceived credibility or follow-up intentions. Data Availability: Data are available upon request.

Evolutionary game analysis of information sharing by institutional investors

2021 ◽  
pp. 1-9
Author(s):  
Hua Li ◽  
Qingqing Lou ◽  
Qiubai Sun ◽  
Bowen Li
Keyword(s):  
Information Sharing ◽  
Institutional Investors ◽  
Information Exchange ◽  
Evolutionary Game ◽  
Stable State ◽  
Point Of View ◽  
Game Model ◽  
Game Analysis ◽  
Relationship Network ◽  
The Relationship

In order to solve the conflict of interests of institutional investors, this paper uses evolutionary game model. From the point of view of information sharing, this paper discusses four different situations. Only when the sum of risk and cost is less than the penalty of free riding, the evolution of institutional investors will eventually incline to the stable state of information sharing. That is, the phenomenon of hugging. The research shows that the institutional investors are not independent of each other, but the relationship network of institutional investors for the purpose of information exchange. The content of this paper enriches the research on information sharing of institutional investors.

scholarly journals B io ‐D em , a tool to explore the relationship between biodiversity data availability and socio‐political conditions in time and space

2021 ◽  
Author(s):  
Alexander Zizka ◽  
Oskar Rydén ◽  
Daniel Edler ◽  
Johannes Klein ◽  
Allison Perrigo ◽  
...  
Keyword(s):  
Data Availability ◽  
Biodiversity Data ◽  
Time And Space ◽  
Political Conditions ◽  
The Relationship

Geography and Local (Dis)advantage: Evidence from Muni Bond Funds

2016 ◽  
Vol 06 (03) ◽  
pp. 1650008 ◽  
Author(s):  
Saiying Deng ◽  
David Rakowski
Keyword(s):  
Mutual Fund ◽  
Knowledge Spillovers ◽  
Geographic Location ◽  
Municipal Bond ◽  
Fund Managers ◽  
Non Local ◽  
Bond Fund ◽  
Business Connections ◽  
Bond Mutual Funds ◽  
The Relationship

We examine the relationship between the geographic location of mutual fund managers and fund performance using the unique setting of single-state municipal-bond mutual funds. We find that local managers underperform non-local muni-bond fund managers. Furthermore, we document that local muni-bond fund managers perform relatively better in states with more local funds, consistent with knowledge spillovers, business connections and networking effects associated with those areas. Locals also perform relatively better in states with higher levels of political integrity, consistent with less political pressure on local fund managers in these locations. Our results are robust to several sensitivity checks.

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