Managerial ability and analysts’ stock recommendations

Soomi Jang, Heeick Choi, Tunde Kovacs and Don M. Autore

Finance Research Letters, 2023, vol. 58, issue PB

Abstract: This study examines whether analysts consider managerial ability in forming their stock recommendations and, if so, whether it improves the quality of their recommendations. We find that sell-side analysts recommend firms with higher managerial ability more favorably, suggesting that analysts value the implications of managerial ability in assessing firm value. Moreover, the profitability of analyst recommendations increases when the recommendation takes managerial ability into account. Overall, our results suggest that managerial ability is a distinct and important attribute of firms in explaining analysts’ stock recommendations and the value of those recommendations to investors.

Keywords: Managerial ability; Stock recommendations; Profitability; Analyst firm experience; Information asymmetry; Firm innovation (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:58:y:2023:i:pb:s1544612323008127

DOI: 10.1016/j.frl.2023.104440

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