Do Analysts' Preferences Affect Corporate Policies?

Francois Degeorge (), Francois Derrien (), Ambrus Kecskes and Sebastien Michenaud
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Ambrus Kecskes: York University - Schulich School of Business
Sebastien Michenaud: Kellstadt Graduate School of Business

No 13-22, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: Equity research analysts tend to cover firms about which they have favorable views. We exploit this tendency to infer analysts' preferences for corporate policies from their coverage decisions. We then use exogenous analyst disappearances to examine the effect of these preferences on corporate policies. After an analyst disappears, firms change their policies in the direction opposite to the analyst's preferences. The influence of analyst preferences on policies is stronger for firms for which analyst coverage is likely to matter more: young firms, and firms with higher market valuations. Our results suggest that firms choose their corporate policies, in part, to be consistent with the preferences of their analysts.

Keywords: Equity research analysts; Preferences; Real effects; Investment; Financing; Payouts; Leverage; Cash holdings (search for similar items in EconPapers)
JEL-codes: G24 G31 G32 G34 G35 (search for similar items in EconPapers)
Pages: 53 pages
Date: 2013-04
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp1322

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