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  • TP_Inv_Horizon

    Rights statement: This is an Accepted Manuscript of an article published by Taylor & Francis in Accounting and Business Research on 06/09/2018, available online: http://www.tandfonline.com/10.1080/00014788.2018.1510303

    Accepted author manuscript, 879 KB, PDF-document

    Embargo ends: 6/03/20

    Available under license: CC BY-NC: Creative Commons Attribution-NonCommercial 4.0 International License

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Strategic distortions in analyst forecasts in the presence of short-term institutional investors

Research output: Contribution to journalJournal article

E-pub ahead of print
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<mark>Journal publication date</mark>6/09/2018
<mark>Journal</mark>Accounting and Business Research
StateE-pub ahead of print
Early online date6/09/18
Original languageEnglish

Abstract

We document that analysts cater to short-term investors by issuing optimistic target prices. Catering dominates among analysts at brokers without an investment banking arm as they face lower reputational cost. The market does not see through the analyst catering activity and their forecasts lead to temporary stock overpricing that short-term institutional investors exploit to offload their holdings to retail traders. We also report evidence consistent with catering brokers being rewarded with more future trades channelled through them. Our study identifies a new source of conflicts of interest in analyst research originating from the ownership composition of a stock.

Bibliographic note

This is an Accepted Manuscript of an article published by Taylor & Francis in Accounting and Business Research on 06/09/2018, available online: http://www.tandfonline.com/10.1080/00014788.2018.1510303