TY - JOUR

T1 - Mitigating the Influence of Analysts Who Issue Aggressive Stock Price Targets

T2 - The Role of Joint versus Separate Evaluation

AU - Chee, Vincent

AU - Savani, Krishna

AU - Tan, Seet‐Koh

N1 - This is the peer reviewed version of the following article: Chee, V., Savani, K. and Tan, S.-K. (2023), Mitigating the Influence of Analysts Who Issue Aggressive Stock Price Targets: The Role of Joint Versus Separate Evaluation*. Contemp Account Res, 40: 526-543. https://doi.org/10.1111/1911-3846.12816 which has been published in final form at https://onlinelibrary.wiley.com/doi/10.1111/1911-3846.12816 This article may be used for non-commercial purposes in accordance With Wiley Terms and Conditions for self-archiving.

PY - 2023/3/31

Y1 - 2023/3/31

N2 - Investors frequently rely on individual analysts' stock price targets. Aggressive price targets often reflect analysts' attempts to strategically influence investors. Therefore, investors' welfare may be compromised if they take aggressive price targets at face value. In this study, we examine conditions under which investors are more likely to infer that analysts who issue aggressive price targets are acting strategically. Investors can evaluate multiple analysts' price targets with or without other related information (e.g., earnings estimates). Investors can also evaluate the information provided by multiple analysts jointly or separately one analyst at a time. Two experiments find that as predicted, when investors evaluate multiple analysts' price targets without earnings estimates, there is no difference in investors' perceptions about whether the aggressive analyst is acting strategically across joint versus separate evaluation. However, also as predicted, when investors evaluate multiple analysts' price targets along with their earnings estimates, investors perceive the aggressive analyst as acting more strategically under joint evaluation than under separate evaluation. Our findings suggest that jointly evaluating multiple analysts' price targets with other related information, such as earnings estimates, can reduce the likelihood that investors would be overly influenced by aggressive analysts.

AB - Investors frequently rely on individual analysts' stock price targets. Aggressive price targets often reflect analysts' attempts to strategically influence investors. Therefore, investors' welfare may be compromised if they take aggressive price targets at face value. In this study, we examine conditions under which investors are more likely to infer that analysts who issue aggressive price targets are acting strategically. Investors can evaluate multiple analysts' price targets with or without other related information (e.g., earnings estimates). Investors can also evaluate the information provided by multiple analysts jointly or separately one analyst at a time. Two experiments find that as predicted, when investors evaluate multiple analysts' price targets without earnings estimates, there is no difference in investors' perceptions about whether the aggressive analyst is acting strategically across joint versus separate evaluation. However, also as predicted, when investors evaluate multiple analysts' price targets along with their earnings estimates, investors perceive the aggressive analyst as acting more strategically under joint evaluation than under separate evaluation. Our findings suggest that jointly evaluating multiple analysts' price targets with other related information, such as earnings estimates, can reduce the likelihood that investors would be overly influenced by aggressive analysts.

KW - Economics and Econometrics

KW - Finance

KW - Accounting

U2 - 10.1111/1911-3846.12816

DO - 10.1111/1911-3846.12816

M3 - Journal article

VL - 40

SP - 526

EP - 543

JO - Contemporary Accounting Research

JF - Contemporary Accounting Research

SN - 0823-9150

IS - 1

ER -