 How do experienced analysts improve price efficiency?Ali C. Akyol, Yiming Qian and Frank Yu Journal of Banking & Finance, 2023, vol. 149, issue C Abstract: We document that return anomalies related to management discretions are mitigated for firms followed by more experienced analysts. Nonetheless, only experience directly covering the firm matters while experience covering other firms is not associated with greater price efficiency. Focusing on the accrual anomaly, we then examine research and monitoring as possible channels through which experience mitigates mispricing. For firms followed by more experienced analysts, we find that forecast revisions and stock prices respond more positively to the accrual component of earnings. We further find that accrual quality is higher in firms followed by more experienced analysts, which holds after using both propensity score matching and exogenous events of brokerage closures and mergers to control for endogeneity. Collectively, our results are consistent with monitoring being the primary mechanism by which experienced analysts reduce accrual mispricing. Keywords: Financial analysts; Accrual anomaly; Experience; Accrual quality (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:149:y:2023:i:c:s0378426623000250 DOI: 10.1016/j.jbankfin.2023.106798 Access Statistics for this article Journal of Banking & Finance is currently edited by Ike Mathur More articles in Journal of Banking & Finance from Elsevier |
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