This paper examines whether group analysts’ research reports are more accurate than nongroup
analysts when they forecast the earnings of the member firms in the same group. Using a
sample of Korean chaebol firms, we test two hypotheses: the group-locality and group-affiliation
hypotheses. Our results show that the forecasts made by the group analysts are less accurate and more
optimistic than those by the non-group analysts, supporting the group-affiliation hypothesis. Further,
we find that the forecast accuracy of the group analysts is not related to the internal sales transaction
ratio and that it increases with the precision of common information rather than idiosyncratic
information – a further evidence inconsistent with the group-locality hypothesis. We also find that
such inaccuracy and the optimism of the group analysts are associated with the group ownership
incentive, which suggests the group-level propping motive. Finally, the results show that the
inaccuracy and the optimism of the group analysts decrease with the analyst following and after the
Regulation Fair Disclosure took effect, suggesting that the forecast bias of group analysts is related to
the external information environment.
Keywords: Group analysts; Group-locality; Group-affiliation; Information Environment
JEL: G24; M41; N25
학술대회/행사
학술대회안내
[2008년 제 4차] Does the short distance between analyst and company
작성자 : 관리자
조회수 : 1048
게시일 :
2008-12-11