Wealth Transfer Effects of Analysts' Misleading Behavior
Gus de Franco,
Hai Lu and
Florin P. Vasvari
Journal of Accounting Research, 2007, vol. 45, issue 1, 71-110
Abstract:
We investigate a sample of 50 firm‐events, identified in the Global Research Analysts Settlement, in which analysts were discovered to have acted misleadingly ex post. In this setting, analysts' incentives caused them to issue public disclosures that differed from their private beliefs. We document that these firms' institutional holdings decline significantly during the period in which the analysts issued misleading disclosures. During this period daily small‐size trades (a proxy for individual investors) are dominated by buy orders while daily large‐size trades (a proxy for institutional investors) are dominated by sell orders. Short interest increases during the event period, consistent with the idea that sophisticated investors are selling. Our estimates of investors' trading losses show that individual investors lost about two and a half times the amount lost by institutions. Overall, the results suggest a wealth transfer from individuals to institutions that is likely attributable to analysts' misleading behavior.
Date: 2007
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (19)
Downloads: (external link)
https://doi.org/10.1111/j.1475-679X.2006.00228.x
Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:bla:joares:v:45:y:2007:i:1:p:71-110
Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0021-8456
Access Statistics for this article
Journal of Accounting Research is currently edited by Philip G. Berger, Luzi Hail, Christian Leuz, Haresh Sapra, Douglas J. Skinner, Rodrigo Verdi and Regina Wittenberg Moerman
More articles in Journal of Accounting Research from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().