The Value of Analysts' Recommendations and the Organization of Financial Research

Carolina Salva and Frédéric Sonney

Review of Finance, 2010, vol. 15, issue 2, 397-440

Abstract: Brokerage houses usually organize their research activities by country or economic sector. We evaluate which research structure provides most value to investors. To do so, we study the relative information content of recommendations issued by country-specialized analysts and sector-specialized analysts. Our findings show that the former issue more valuable recommendations. The strength of country-specific commonalities and institutional factors explain at least part of the better performance of country-specialized financial analysts. Although analysts' geographic location has been shown in the literature to be a significant determinant of earnings forecast accuracy, its relevance is more subtle when it comes to stock recommendations. Copyright 2010, Oxford University Press.

Date: 2010
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