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
Available under license: CC BY-NC: Creative Commons Attribution-NonCommercial 4.0 International License
Final published version
Research output: Contribution to Journal/Magazine › Journal article › peer-review
Research output: Contribution to Journal/Magazine › Journal article › peer-review
}
TY - JOUR
T1 - Strategic distortions in analyst forecasts in the presence of short-term institutional investors
AU - Bilinski, Pawel Tomasz
AU - Cumming, Douglas
AU - Hass, Lars Helge
AU - Stathopoulos, Konstantinos
AU - Walker, Martin
N1 - 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
PY - 2019/2/28
Y1 - 2019/2/28
N2 - 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.
AB - 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.
KW - target prices
KW - earnings forecasts
KW - strategic distortions
KW - short-term investors
U2 - 10.1080/00014788.2018.1510303
DO - 10.1080/00014788.2018.1510303
M3 - Journal article
VL - 49
SP - 305
EP - 341
JO - Accounting and Business Research
JF - Accounting and Business Research
SN - 0001-4788
IS - 3
ER -