Long-term institutional shareholdings and stock price informativeness of analyst target prices

Amanjot Singh, Harminder Singh and Venura Welagedara

China Accounting and Finance Review, 2025, vol. 27, issue 5, 609-634

Abstract: PurposeThis study examines whether long-term institutional shareholdings affect the informativeness of analyst target price revisions.Design/methodology/approachUsing institutional investors’ portfolio holdings and a sample of 53,988 target prices from 2000 to 2019, we relate cumulative abnormal returns (CARs) to long-term institutional shareholdings to investigate whether long-term investment horizon influences the stock market response to analyst target price revisions. We identify long-term institutional shareholdings based on their quarterly portfolio churn ratios.FindingsWe find that firms with more long-term institutional shareholdings experience positive returns on target price revisions. This positive response is pronounced for (1) firms with more long-term motivated institutional shareholdings with higher incentives to monitor, (2) firms with higher idiosyncratic volatility and (3) firms with a higher probability of informed trading. Investors find more value in target price revisions when issued by sophisticated analysts, i.e. with higher experience, higher earnings accuracy and a bigger brokerage size. Specifically, we report that target price revisions provide more incremental information to investors than earnings forecasts and stock recommendation revisions. Our findings remain robust to several alternative specifications, addressing the endogeneity issues.Originality/valueOur study contributes to the extant literature on the informativeness of analyst target prices while exploring how the investment horizon influences investors’ reliance on firm-level information.

Keywords: Analysts; Institutional investors; Target prices (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eme:cafrpp:cafr-09-2023-0110

DOI: 10.1108/CAFR-09-2023-0110

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