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    Rights statement: This is an Accepted Manuscript of an article published by Taylor & Francis in Accounting and Business Research on 15/11/2016, available online: http://www.tandfonline.com/10.1080/00014788.2016.1230487

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Does equity analyst research lack rigour and objectivity?: Evidence from conference call questions and research notes

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Does equity analyst research lack rigour and objectivity? Evidence from conference call questions and research notes. / Salzedo, Catherine Jane; Young, Steven Eric; El Haj, Mahmoud.

In: Accounting and Business Research, Vol. 48, No. 1, 2018, p. 5-36.

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@article{cdd39e846dc94941b73b33f1e6ce7c32,
title = "Does equity analyst research lack rigour and objectivity?: Evidence from conference call questions and research notes",
abstract = "Doubts have been raised about the rigour and objectivity of sell-side analysts{\textquoteright} research due to institutional structures that promote pro-management behaviour. However, research in psychology stresses the importance of controlling for biases in individuals{\textquoteright} inherent cognitive processing behaviour when drawing conclusions about their propensity to undertake careful scientific analysis. Using social cognition theory, we predict that the rigour and objectivity evident in analyst research is more pronounced following unexpected news in general and unexpected bad news in particular. We evaluate this prediction against the null hypothesis that analyst research consistently lacks rigour and objectivity to maintain good relations with management. Using U.S. firm earnings surprises as our conditioning event, we examine the content of analysts{\textquoteright} conference call questions and research notes to assess the properties of their research. We find that analysts{\textquoteright} notes and conference call questions display material levels of rigour and objectivity when earnings news is unexpectedly positive, and that these characteristics are more pronounced in response to unexpectedly poor earnings news. Results are consistent with analysts{\textquoteright} innate cognitive processing response counteracting institutional considerations when attributional search incentives are strong. Exploratory analysis suggests that studying verbal and written outputs provides a more complete picture of analysts{\textquoteright} work.",
keywords = " capital markets, textual analysis, analyst reports, conference calls",
author = "Salzedo, {Catherine Jane} and Young, {Steven Eric} and {El Haj}, Mahmoud",
note = "This is an Accepted Manuscript of an article published by Taylor & Francis in Accounting and Business Research on 15/11/2016, available online: http://www.tandfonline.com/10.1080/00014788.2016.1230487",
year = "2018",
doi = "10.1080/00014788.2016.1230487",
language = "English",
volume = "48",
pages = "5--36",
journal = "Accounting and Business Research",
issn = "0001-4788",
publisher = "Routledge",
number = "1",

}

RIS

TY - JOUR

T1 - Does equity analyst research lack rigour and objectivity?

T2 - Evidence from conference call questions and research notes

AU - Salzedo, Catherine Jane

AU - Young, Steven Eric

AU - El Haj, Mahmoud

N1 - This is an Accepted Manuscript of an article published by Taylor & Francis in Accounting and Business Research on 15/11/2016, available online: http://www.tandfonline.com/10.1080/00014788.2016.1230487

PY - 2018

Y1 - 2018

N2 - Doubts have been raised about the rigour and objectivity of sell-side analysts’ research due to institutional structures that promote pro-management behaviour. However, research in psychology stresses the importance of controlling for biases in individuals’ inherent cognitive processing behaviour when drawing conclusions about their propensity to undertake careful scientific analysis. Using social cognition theory, we predict that the rigour and objectivity evident in analyst research is more pronounced following unexpected news in general and unexpected bad news in particular. We evaluate this prediction against the null hypothesis that analyst research consistently lacks rigour and objectivity to maintain good relations with management. Using U.S. firm earnings surprises as our conditioning event, we examine the content of analysts’ conference call questions and research notes to assess the properties of their research. We find that analysts’ notes and conference call questions display material levels of rigour and objectivity when earnings news is unexpectedly positive, and that these characteristics are more pronounced in response to unexpectedly poor earnings news. Results are consistent with analysts’ innate cognitive processing response counteracting institutional considerations when attributional search incentives are strong. Exploratory analysis suggests that studying verbal and written outputs provides a more complete picture of analysts’ work.

AB - Doubts have been raised about the rigour and objectivity of sell-side analysts’ research due to institutional structures that promote pro-management behaviour. However, research in psychology stresses the importance of controlling for biases in individuals’ inherent cognitive processing behaviour when drawing conclusions about their propensity to undertake careful scientific analysis. Using social cognition theory, we predict that the rigour and objectivity evident in analyst research is more pronounced following unexpected news in general and unexpected bad news in particular. We evaluate this prediction against the null hypothesis that analyst research consistently lacks rigour and objectivity to maintain good relations with management. Using U.S. firm earnings surprises as our conditioning event, we examine the content of analysts’ conference call questions and research notes to assess the properties of their research. We find that analysts’ notes and conference call questions display material levels of rigour and objectivity when earnings news is unexpectedly positive, and that these characteristics are more pronounced in response to unexpectedly poor earnings news. Results are consistent with analysts’ innate cognitive processing response counteracting institutional considerations when attributional search incentives are strong. Exploratory analysis suggests that studying verbal and written outputs provides a more complete picture of analysts’ work.

KW - capital markets

KW - textual analysis

KW - analyst reports

KW - conference calls

U2 - 10.1080/00014788.2016.1230487

DO - 10.1080/00014788.2016.1230487

M3 - Journal article

VL - 48

SP - 5

EP - 36

JO - Accounting and Business Research

JF - Accounting and Business Research

SN - 0001-4788

IS - 1

ER -