Political contributions and analyst behavior

Danling Jiang, Alok Kumar () and Kelvin K. F. Law
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Alok Kumar: University of Miami

Review of Accounting Studies, 2016, vol. 21, issue 1, No 2, 37-88

Abstract: Abstract We show that the personal traits of analysts, as revealed by their political donations, influence their forecasting behavior and stock prices. Analysts who contribute primarily to the Republican Party adopt a more conservative forecasting style. Their earnings forecast revisions are less likely to deviate from the forecasts of other analysts and are less likely to be bold. Their stock recommendations also contain more modest upgrades and downgrades. Overall, these analysts produce better quality research, which is recognized and rewarded by their employers, institutional investors, and the media. Stock market participants, however, do not fully recognize their superior ability as the market reaction following revisions by these analysts is weaker.

Keywords: Equity analysts; Political contribution; Conservative analysts; Forecasting style; Market reaction (search for similar items in EconPapers)
JEL-codes: G14 G24 M41 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (35)

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DOI: 10.1007/s11142-015-9344-9

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