Political contributions and analyst behavior
Jiang,D. Kumar,A. Law,Kelvin
Jiang,D.
Kumar,A.
Law,Kelvin
Abstract
We show that the personal traits of analysts, as revealed by their political donations, influence their forecasting behavior and stock prices. Analysts who contribute primarily to the Republican Party adopt a more conservative forecasting style. Their earnings forecast revisions are less likely to deviate from the forecasts of other analysts and are less likely to be bold. Their stock recommendations also contain more modest upgrades and downgrades. Overall, these analysts produce better quality research, which is recognized and rewarded by their employers, institutional investors, and the media. Stock market participants, however, do not fully recognize their superior ability as the market reaction following revisions by these analysts is weaker.
Description
Date
2016-03
Journal Title
Journal ISSN
Volume Title
Publisher
Research Projects
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Journal Issue
Keywords
equity analysts, political contribution, conservative analysts, forecasting style, market reaction, G14 - Information and Market Efficiency ; Event Studies ; Insider Trading, G24 - Investment Banking ; Venture Capital ; Brokerage ; Ratings and Ratings Agencies, M41 - Accounting
Citation
Jiang, D, Kumar, A & Law, K 2016, 'Political contributions and analyst behavior', Review of Accounting Studies, vol. 21, no. 1, pp. 37-88. https://doi.org/10.1007/s11142-015-9344-9