Do analyst recommendations reflect shareholder rights?

Don M. Autore, Tunde Kovacs and Vivek Sharma
Authors registered in the RePEc Author Service: Vivek Singh ()

Journal of Banking & Finance, 2009, vol. 33, issue 2, 193-202

Abstract: We examine whether sell-side analyst recommendations reflect shareholder rights. Our rationale is that analysts should be influenced by external governance only if market participants do not efficiently price its value. We find that stronger shareholder rights are associated with more favorable recommendations. Further analysis reveals that analysts favor firms with strong shareholder rights only when strong rights appear to be warranted, but do not penalize firms for having strong rights when not needed. These findings occupy middle ground in the debate on the pricing efficiency of shareholder rights. Moreover, we find that firm value is positively associated with the strength of shareholder rights regardless of the expected external governance structure. The latter result is consistent with a "one-size-fits-all" interpretation, and implies that firms across the board could increase share value by reducing their number of anti-takeover provisions.

Keywords: Analyst; recommendations; Corporate; governance; Shareholder; rights; Anti-takeover; provisions; Market; efficiency (search for similar items in EconPapers)
Date: 2009
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:33:y:2009:i:2:p:193-202

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