Common ownership and analyst forecasts
We examine the effect of the common ownership relation between brokerage houses and the firms covered by their analysts (referred to as co-owned brokerage houses, co-owned firms, and connected analysts, respectively) on analyst forecast performance. Common ownership can help the connected analysts h...
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sg-smu-ink.soa_research-30582024-03-04T07:53:49Z Common ownership and analyst forecasts CHENG, Qiang LUO, Shuqing ZHANG, Jinping We examine the effect of the common ownership relation between brokerage houses and the firms covered by their analysts (referred to as co-owned brokerage houses, co-owned firms, and connected analysts, respectively) on analyst forecast performance. Common ownership can help the connected analysts have better access to co-owned firms, leading to higher-quality analyst research. However, common owners have incentives for higher valuation of the co-owned firms and thus can exert pressure on the connected analysts to issue optimistically biased research reports for these firms. We find that common ownership improves analyst forecast accuracy. This result is robust to a difference-in-differences design that exploits exogenous shocks to common ownership. The effects vary systematically with the quality of alternative sources of information that analysts can access for the co-owned firms. Overall, our paper contributes to the literature by documenting that common ownership can facilitate information communication. 2024-01-01T08:00:00Z text application/pdf https://ink.library.smu.edu.sg/soa_research/2031 info:doi/10.1080/09638180.2022.2082506 https://ink.library.smu.edu.sg/context/soa_research/article/3058/viewcontent/CommonOwnershipAF_av.pdf http://creativecommons.org/licenses/by-nc-nd/4.0/ Research Collection School Of Accountancy eng Institutional Knowledge at Singapore Management University common ownership analyst forecasts institutional environments Accounting Corporate Finance |
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common ownership analyst forecasts institutional environments Accounting Corporate Finance CHENG, Qiang LUO, Shuqing ZHANG, Jinping Common ownership and analyst forecasts |
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We examine the effect of the common ownership relation between brokerage houses and the firms covered by their analysts (referred to as co-owned brokerage houses, co-owned firms, and connected analysts, respectively) on analyst forecast performance. Common ownership can help the connected analysts have better access to co-owned firms, leading to higher-quality analyst research. However, common owners have incentives for higher valuation of the co-owned firms and thus can exert pressure on the connected analysts to issue optimistically biased research reports for these firms. We find that common ownership improves analyst forecast accuracy. This result is robust to a difference-in-differences design that exploits exogenous shocks to common ownership. The effects vary systematically with the quality of alternative sources of information that analysts can access for the co-owned firms. Overall, our paper contributes to the literature by documenting that common ownership can facilitate information communication. |
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CHENG, Qiang LUO, Shuqing ZHANG, Jinping |
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CHENG, Qiang LUO, Shuqing ZHANG, Jinping |
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CHENG, Qiang |
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Common ownership and analyst forecasts |
title_short |
Common ownership and analyst forecasts |
title_full |
Common ownership and analyst forecasts |
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Common ownership and analyst forecasts |
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Common ownership and analyst forecasts |
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common ownership and analyst forecasts |
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Institutional Knowledge at Singapore Management University |
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2024 |
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https://ink.library.smu.edu.sg/soa_research/2031 https://ink.library.smu.edu.sg/context/soa_research/article/3058/viewcontent/CommonOwnershipAF_av.pdf |
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