The effects of firms’ information environment on analysts’ herding behavior

Ryan D. Leece () and Todd P. White ()
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Ryan D. Leece: University of Alabama at Birmingham
Todd P. White: University of New Mexico

Review of Quantitative Finance and Accounting, 2017, vol. 48, issue 2, No 9, 503-525

Abstract: Abstract We find financial analysts herd to a greater degree in firms with more opaque information environments as measured by the incidence of short-term institutional investors present. The S-statistic, a measure of forecast bias, and forecast timing and quality metrics are used to measure analyst herding behavior. The results are consistent with the notion that opaque information environments are more conducive to analysts engaging in reputational herding behavior where more capable analysts act first and less capable analysts follow. Additionally, analysts are more likely to issue forecast revisions subsequent to management earnings guidance in less opaque environments. Robustness tests indicate our operational measure of opacity is not subsumed by other measures of the information environment, namely information asymmetry.

Keywords: Financial analysts; Institutional ownership; Herding; Earnings forecasting (search for similar items in EconPapers)
JEL-codes: D82 D84 G20 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (2)

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DOI: 10.1007/s11156-016-0559-z

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