 Does director affiliation lead to analyst bias?Prem G. Mathew and H. Semih Yildirim Applied Economics, 2015, vol. 47, issue 3, 272-287 Abstract: This study examines the ability of security analysts to provide objective earnings forecasts for firms with which the analyst's brokerage firm has a director affiliation. The affiliation that we examine is where the brokerage firm has, on its board of directors, a director or an upper management individual from the firm which an analyst at the brokerage firm provides coverage. We find that affiliated analysts tend to provide earnings forecasts that are insignificantly different from unaffiliated analysts in terms of accuracy. However, we also find that forecasts provided by affiliated analysts tend to be significantly more pessimistic than those provided by their unaffiliated counterparts. This pessimistic bias in their earnings forecast will more easily allow the covered firm to beat earnings expectations when earnings are realized. We find that this bias surfaced after the Global Settlement decision, an enforcement agreement between large investment banks and the Securities and Exchange Commission (SEC) regarding issues surrounding conflicts of interest. Date: 2015 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:taf:applec:v:47:y:2015:i:3:p:272-287 Ordering information: This journal article can be ordered from DOI: 10.1080/00036846.2014.969825 Access Statistics for this article Applied Economics is currently edited by Anita Phillips More articles in Applied Economics from Taylor & Francis Journals |
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