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theses

This dissertation consists of two essays that focus on financial analysts, who are important intermediaries between firms and investors. They process public information and discover private information to find investing insight. This dissertation explores several factors that affect analysts’ performance.
The first essay examines the effect of stopping management earnings guidance on the value of financial analysts’ research. This study offers evidence that the value of analysts’ recommendation and forecast revisions increases after guidance cessation. Moreover, this value increase is more pronounced for firms with R&D investments, multiple business segments, or higher institutional ownership, and when it is GAAP guidance or earnings-component guidance that is discontinued. Additional exploration of the value increase suggests that analysts work harder to produce more informative research after a guidance stoppage.
The second essay uses the setting of analysts’ coverage initiation to analyze how industry knowledge affects analysts’ performance. It finds that analysts having industry research experience have better forecasting accuracy, and their forecasts tend to be timelier and bolder than forecasts issued by analysts without industry experience. Furthermore, the short-term stock price impact and long-term performance are higher for industry-experienced analysts’ initial recommendations. These findings indicate that analysts’ industry research experience improves their research. In additional analyses, this study explores several factors that may explain why brokerage firms assign analysts to cover firms in their unfamiliar industries, and discusses a consensus forecast of industry experts, which is shown to be more accurate than the consensus of all analysts' forecasts.

ETD_10283

Ph.D.

Includes bibliographical references

doi:10.7282/t3-4gtd-ex29

ETD doctoral

The author owns the copyright to this work.