Analysts’ choice of peer companies

Gus Franco (), Ole-Kristian Hope () and Stephannie Larocque ()
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Gus Franco: University of Toronto
Ole-Kristian Hope: University of Toronto
Stephannie Larocque: University of Notre Dame

Review of Accounting Studies, 2015, vol. 20, issue 1, No 3, 82-109

Abstract: Abstract This is the first large-scale study to examine the peer companies used by sell-side equity analysts in their research reports. Using a unique hand-collected data set, we investigate the relation between peer valuation and peer choice by analysts. We find that analysts on average select peer companies with high valuations and that this effect varies systematically with analysts’ incentives and ability. Our evidence provides partial support for the idea that analysts choose peers strategically. We also find some support for the idea that the selection of peers with high valuations is used in part to justify optimistically skewed target prices and stock recommendations.

Keywords: Analysts; Comparable; Peer; Valuation (search for similar items in EconPapers)
JEL-codes: G30 G31 G32 G34 M41 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (1)

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DOI: 10.1007/s11142-014-9294-7

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