Investor Attention, Analyst Optimism, and Stock Price Crash Risk

This paper used the A-shares listed companies in China as samples, constructed a comprehensive indicator of investor attention, and conducted an empirical analysis on the correlations among investor attention, analyst optimism, and stock price crash risk. The results indicated that investor attention aggravates the stock price crash risk and has a positive effect on analyst optimism. Meanwhile, the analyst optimism plays a mediating role in the positive correlation between investor attention and stock price crash risk. In addition to that, institutional investor attention also has direct and indirect effects on the crash risk.

Sustainability of Analyst Recommendations in Multiple Lead Underwriter IPOs

Recently, a new organizational form of syndicate—multiple lead underwriter (MLU) initial public offerings (IPOs)—has emerged in IPOs. In addition to the increased deal complexity, lead underwriters in MLU IPOs face a new competition between them after underwriter selection, which is not present in single lead underwriter (SLU) IPOs. It is therefore questionable whether recommendations by analysts from lead underwriters of the MLU IPOs are as sustainable as those of the SLU IPOs. We examine IPO recommendations to capture how this new syndicate structure affects analyst behavior in terms of analyst optimism and investment value. In contrast to the popular conflict of interest perspective, our findings point to the notion that the new syndicate structure suppresses bias in recommendations and that reputation upholding incentive dominates pressure from competition. MLU-affiliated analysts are not more optimistic and provide more informative research coverage whose informativeness, however, fades away shortly after the recommendation releases. Our findings overall indicate the existence of sustainability in the MLU IPO recommendations.

Analyst Contrarianism

We examine a specific form of what we term analyst contrarianism. We define contrarianism as cases where an analyst expresses a summary opinion contrary to the direction of a given earnings surprise or revision. Distinct from analyst optimism or boldness, we document that analysts interpret negative (positive) earnings news in a positive (negative) light in approximately 11–15 percent of reports. We conjecture that some analysts look for opportunities to make a contrarian stock call for their clients in order to gain visibility, recognition, and career advancement. Our empirical evidence, which is supported by analyst interviews and content analysis of analyst reports, shows that: (1) analysts at non-top-tier brokerage houses are more likely to make a contrarian call, (2) analyst reports that contain contrarian opinions are associated with greater market reactions, and (3) contrarian analysts are more likely to exhibit career advancement. JEL Classifications: G41; M41.