Date of Award

2021

Degree Type

Dissertation

Degree Name

Doctor of Philosophy in Business Administration

Specialization

Finance

Department

Business Administration

First Advisor

Shingo Goto

Abstract

This dissertation investigates analyst peer effects and their implications for capital markets and market participants. The first manuscript examines the implications of analyst peer effects for information intermediary and monitoring roles played by sell-side analysts. We find that firms that are strongly influenced by central analysts reduce accrual-based earnings management but increase real earnings management, suggesting that the informational advantages of central analysts enhance information transparency, but induce managers to switch measures of earnings management. These findings are more pronounced in firms with high information asymmetry and weak corporate governance, and partially affected by SOX. Our results are robust to alternative measures and tests for endogeneity.

In the second manuscript, we demonstrate how analyst peer effects are reflected in investors’ trading behaviors by investigating the relationship between analyst peer effects and stock price informativeness. We find that firms with a larger proportion of central analysts have more informative stock prices. Further, the negative association between analyst coverage and price delay is mainly driven by central analysts rather than peripheral analysts. Our findings are more pronounced in firms with greater information asymmetry and lower information-processing costs. Our results are robust to alternative measures of stock price informativeness and tests for endogeneity.

The third manuscript studies the relationship between analyst peer effects and forecast consistency. We develop a theoretical model to show that the cash flow news component predicts stock returns because the market underestimates the persistence of cash flow growth. Our results show that peripheral analysts display greater forecast consistency at the analyst- and firm-level. In addition, when firms are covered by low peripheral analyst coverage, we observe that these firms have significant profitability anomaly returns. This effect is more pronounced for the post-Reg FD period.

Available for download on Friday, January 05, 2024

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