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Since the United States securities market's creation and promulgation of the Investment Advisers Act in 1940, financial analysts transitioned from a highly unregulated practice to one of the most heavily regulated professions. Relying on multiple formal archival sources, this article explores the antecedents behind this bolstering event. Applying a chronological historical analysis, findings suggest that three factors forced regulators to intervene: the unethical abuses uncovered by a committee with highly specialised skills, the inability of financial analysts to adhere to ethical practices and professional segregation combined with absent collective institutional values. These findings illustrate the regulatory consequences in collective sanctioning cases (rather than criminal or economic penalties imposed on specific individuals). A socio-economic historical triangulation enriches the quality of these findings. [ABSTRACT FROM AUTHOR]

Research Question/Issue: This study examines the association between managerial ability and the extent of firm‐level climate change disclosures and the moderating role of corporate governance in this association. Research Findings/Insights: Results based on a sample of 2298 firm‐year observations from the United States (US) from 2005 to 2019 suggest that firms with more capable managers tend to make more climate change disclosures. This significant positive association is weakened when firms suffer from weak corporate governance. These findings remain robust after addressing omitted time‐invariant variable bias, observable heterogeneity bias, sample selection bias, and reverse causality and when using alternative climate change disclosure proxies. Further analysis shows that climate change disclosures have a mediating role in the association between managerial ability and firm valuation. Theoretical/Academic Implications: Given the growing importance of integrating climate change‐related information into a firm's operations and the pressure exerted by various stakeholders, understanding the drivers of climate change disclosures has emerged as an important area of research in the accounting and finance literature. To the best of our knowledge, this is the first study to examine any link between managerial ability and climate change disclosures. Practitioner/Policy Implications: Considering the recent pressure imposed on companies by regulatory authorities for more climate change disclosures, our study's findings have important implications for regulators, policy makers, investors, financial analysts, researchers, and firms. [ABSTRACT FROM AUTHOR]

This study examines whether disruptive life events affect how analysts assess risk. We exploit the staggered arrival of hurricanes between 1996 and 2009 at analysts' office locations across the United States as a plausibly exogenous shock in the analysts' experience of disruptive life events. We show in a difference-in-differences setting that relative to non-affected analysts, analysts in states affected by hurricanes issue less optimistic forecasts for non-affected firms after hurricanes. The temporary effects are strongest for affected analysts who had never before experienced a hurricane in their office location. The evidence suggests that analysts use the availability heuristic to assess risk. We observe the same effects in recent years, as our analysis based on Superstorm Sandy in 2012 yields similar results. Overall, our evidence indicates that disruptive life events affect analysts' judgments. JEL Classifications: D81; D83; G02; G24; G29. [ABSTRACT FROM AUTHOR]

During 1980–2000, an average of 310 companies per year went public in the United States. Since 2000, the average has been only 99 initial public offerings (IPOs) per year, with the drop especially precipitous among small firms. Many have blamed the Sarbanes-Oxley Act of 2002 and the 2003 Global Settlement’s effects on analyst coverage for the decline in IPO activity. We find very little support for the conventional wisdom, and we offer an alternative explanation. Our economies of scope hypothesis posits that the advantages of selling out to a larger organization, which can speed a product to market and realize economies of scope, have increased relative to the benefits of operating as an independent firm. [ABSTRACT FROM PUBLISHER]

We examine how gender and beauty affect the likelihood of being voted as an All-Star in the financial analyst profession in both the United States and China. We find that female analysts are more likely to be voted as All-Star analysts in the United States, but good-looking female U.S. analysts are less likely to be voted as All-Stars. The conclusion is the opposite for Chinese analysts. We find that female analysts in China are less likely to be voted as All-Stars, but the likelihood increases with their facial attractiveness. These findings implicate a beauty penalty for female analysts in the United States and gender discrimination against female analysts in China. This career path evidence from a competitive financial industry suggests that gender and beauty biases may be rooted deeply in culture and the legal environment and should not be treated homogenously. [ABSTRACT FROM AUTHOR]

Research summary: This study examines the impact of financial analysts on a firm's corporate social performance (CSP). We integrate research on time horizons with stakeholder theory and argue that, in response to short-term pressure from financial analysts, firms and their managers become more short-term focused and limit investment in socially responsible activities. Using broker mergers and closures in the United States as exogenous shocks to analyst coverage and a difference-in-differences research design, we find that an exogenous decrease in analyst coverage leads to better CSP, establishing a causal relationship between analyst coverage and the level of a firm's CSP. The impact of financial analysts on a firm's CSP is exacerbated if the terminated analyst works for a large brokerage house and has more general- and firm-specific experiences. Managerial summary: This study looks at the relationship between financial analysts, a key stakeholder group of the capital market, and a firm's socially responsible activities. Using a sample of U.S. publicly listed firms during the period of 2001–2013, our study finds novel evidence that the pressure to meet earnings target set by financial analysts hinders a firm's socially responsible performance. In addition, this pressure is more salient for firms with analysts that work for large brokerage houses and have more experiences. This study provides new insights to corporate social responsibility research by evaluating the impact of financial analysts on firms' social engagement. [ABSTRACT FROM AUTHOR]

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This study examines the effect of pressure felt by management to meet or beat analysts' earnings forecasts on firms' behavior in oligopolistic output competition. We argue that firms under such earnings pressure strive to increase current profits by exploiting market power opportunities and tightening output, even though these acts could encourage rival output expansion. Using data from the U.S. electricity generation industry, we found that firms facing earnings pressure tended to restrict output in markets in which market structure and competitor characteristics were favorable for the exercise of market power, but their competitors tended to increase output in those markets. [ABSTRACT FROM AUTHOR]

Eli Bartov and Daniel Cohen (2009) test whether there has been a decline in the extent to which managers engage in opportunistic activities to meet or beat analyst benchmarks after the passage of the Sarbanes-Oxley Act (SOX) in response to the well-publicized corporate scandals of 2001 and 2002. They document a decline in the proportion of firms just meeting or beating analyst expectations (JMB firms) in the Post-SOX period. Focusing on the specific strategic actions taken by JMB firms, they find evidence of a shift away from expectations management and earnings management via accruals, towards earnings management via real activities. The research setting is intuitively appealing, and the results documented in the paper are very interesting. However, there appear to be multiple inferences that can be drawn from these results. In particular, the patterns documented in the paper raise questions about whether the effects of regulation (in this case, SOX) are indeed beneficial for capital markets, an issue that is clearly an interesting topic for further examination. [ABSTRACT FROM AUTHOR]

In this paper, we analyze how financial analysts generate information, make decisions about firm coverage, and try to maintain their forecasting accuracy after the passage of Regulation Fair Disclosure ("Reg FD"). Using the model developed by Barron, Kim, Lim, and Stevens 1998, we find that analysts are investing more effort in idiosyncratic information discovery. In order to do this, individual analysts appear to be reducing coverage for well-followed firms while increasing coverage of firms that were less followed prior to Reg FD. Analysts who had preferential links with firms that they covered, such as analysts from large brokerage houses, tend to have greater forecast accuracy in the pre-FD period. However, these analysts are unable to sustain their forecasting superiority in the post-FD period, which suggests that there has been a leveling of the information playing field among analysts. Overall, our results reflect a trend toward greater reliance on idiosyncratic information discovery on part of the financial analysts. [ABSTRACT FROM AUTHOR]

We identify characteristics of financial analysts that have been shown to be associated with relative forecast accuracy in the United States and examine these characteristics within 10 countries. We find that relative forecast accuracy is influenced by years of experience, size of the analyst's employer, and frequency of forecast issuance for many of these countries, and show that the significance of experience and employer is conditional on the type of culture and corporate governance of the country. [ABSTRACT FROM AUTHOR]

The general theme of examining components of earnings is of interest to both practitioners and academics, given its potential for allowing investors and analysts to more precisely forecast earnings and estimate firm value. For U.S. multinational firms, prior research indicates that while the foreign and domestic earnings components are value relevant, the market fails to fully incorporate the higher persistence of foreign earnings. However, findings of potential market mispricing can be attributed to alternative explanations such as unidentified risk factors or flaws in research design. In this study, we seek to circumvent these concerns by examining whether financial analysts (who are deemed to be sophisticated users of financial statements and act as intermediaries between companies and investors) fully incorporate the time-series properties of foreign and domestic earnings in formulating their earnings forecasts. Similar to market-based studies, we find that analysts do distinguish between foreign and domestic earnings. However, we find that analysts also fail to fully incorporate the higher persistence of foreign earnings. Finally, we find that analysts' underestimation of foreign earnings persistence appears to parallel the similar finding at the market level. We discuss how our findings relate to the prior literature, and what they imply for accounting research and practice. Specifically, our study complements previous research which appears to undermine the notion of an efficient market. Also, we find that analysts' bias is in the direction of lowering earnings expectations by underestimating the persistence of foreign earnings, which suggests that collusion with management to inflate earnings expectations is not a plausible explanation for the... [ABSTRACT FROM AUTHOR]

Lang, Lins, and Miller [2002] investigate the relation between cross-listing in the United States and information intermediation by analysts. The results suggest that cross-listing in the United States increases analyst following and forecast accuracy and that both variables are associated with Tobin's Q. These findings are interesting and advance the cross-listing literature in several ways. This discussion raises two issues. First, I highlight that the sources of cross-listing effects are not obvious and are difficult to disentangle. To illustrate this point, I replicate the analysis using cross-listed Canadian firms, for which mandated disclosures are held constant. Thus, if disclosure effects are important for documented cross-listing effects, I expect to find no relation in the Canadian sample. The findings for forecast accuracy are consistent with this hypothesis. However, analyst following continues to be significantly higher for cross-listed Canadian firms. These findings suggest that the sources of cross-listing effects differ for analyst coverage and forecast accuracy. Second, I discuss the link between analyst variables, firm value, and cost of capital. As they are only tenuously related, I draw attention to some unresolved questions and areas for future research. [ABSTRACT FROM AUTHOR]

We examine the expiration of the IPO quiet period, which occurs after the 25th calendar day following the offering. For IPOs during 1996 to 2000, we find that analyst coverage is initiated immediately for 76 percent of these firms, almost always with a favorable rating. Initiated firms experience a five-day abnormal return of 4.1 percent versus 0.1 percent for firms with no coverage. The abnormal returns are concentrated in the days just before the quiet period expires. Abnormal returns are much larger when coverage is initiated by multiple analysts. It does not matter whether a recommendation comes from the lead underwriter or not. [ABSTRACT FROM AUTHOR]

The article comments on the paper "High-Technology Intangibles and Analysts' Forecasts," by Orie E. Barron, Donal Byard, Charles Kile and Edward J. Riedl, presented at the 2001 Journal of Accounting Research Conference. The paper looks at the association between firms' intangible assets and properties of the information contained in analysts' earnings forecasts. It is assumed that earnings forecasts for firms with greater intangible assets will contain more private information on future earnings. The author notes the idea that current earnings may not be as useful in predicting future earnings for high intangibles firms is pivotal to this study. The author also admits the possibility that the uncertainty associated with intangible assets may lead to a higher incidence of mismatched revenues and expenses being reported.

Prior research has documented a finding that local analysts provide more accurate earnings forecasts than nonlocal analysts in many settings. However, little is known about local and nonlocal analysts' relative earnings forecast abilities for ADR stocks. In this study, we find that the local advantage disappears for ADR stocks and that nonlocal analysts in fact outperform local ones in this case. We investigate the source of this 'local disadvantage' and find evidence against hypotheses based on accounting standards and exchange rates. We document that the local advantage decreases with increased investor interest in foreign firms, consistent with our nonlocal investors' interest hypothesis. [ABSTRACT FROM AUTHOR]

The article presents research concerning the accuracy of financial forecasting by individual analysts and their statistical identification through ex post forecast accuracy measures. The concept of a superior forecaster itself is challenged, citing research suggesting that all forecasters are essentially equal in ability. Fixed effects regression models and rank-ordering methodologies are used to nonparametrically compare analysts. Results from the study are given, stating no correlative factors. Implications of the research on broader market indicator structures are also explored.

The article presents the experiences of the author as an analyst in the Political and Economics Section of the Air Targets Division of the U.S. Department of Defense. The responsibility of the author was to select political targets for nuclear attack in various cities of the Soviet Union. Each target and its strategic significance was described in the Strategic Summary Statement prepared by the analysts.

ABSTRACT We investigate whether unpleasant environmental conditions affect stock market participants' responses to information events. We draw from psychology research to develop a new prediction that weather-induced negative moods reduce market participants' activity levels. Exploiting geographic variation in equity analysts' locations, we find compelling evidence that analysts experiencing unpleasant weather are slower or less likely to respond to an earnings announcement relative to analysts responding to the same announcement but experiencing pleasant weather. Price association tests find evidence consistent with reduced activity due to weather-induced moods delaying equilibrium price adjustments following earnings announcements. We also use our analyst-based research design to re-examine an existing prediction that unpleasant weather induces investor pessimism, and find evidence of both analyst pessimism and reduced activity in the presence of unpleasant weather. Together, our study provides new evidence that both extends and reaffirms findings of a relation between unpleasant weather and market activities, and contributes to the broader psychology and economics literature on the impact of weather-induced mood on labor productivity. [ABSTRACT FROM AUTHOR]

This study examines the effects of the interactions among IFRS adoption, analyst coverage, and crosslistings in the U.S. on the voluntary disclosure of Brazilian public companies. We document a significant positive shift on voluntary disclosure incentives among cross-listed firms from the IFRS pre-adoption period to the post-adoption period. We also find that analyst coverage has a positive association with voluntary disclosure over the IFRS adoption process; however, the interaction between IFRS adoption and analysts affects positively only environmental and social disclosure. Our results have some implications to regulators, investors, and practitioners. [ABSTRACT FROM AUTHOR]

Our study introduces analyst/investor days, a new disclosure medium that allows for private interactions with influential market participants. We also highlight interdependencies in the choice and information content of analyst/investor days and conference presentations, a well-researched disclosure medium that similarly allows for private interactions. Analyst/investor days are less frequent, but with longer duration and greater price impact than conference presentations. They are mostly hosted by firms that already have opportunities to interact with investors at conferences, but whose complex and diverse activities make the short duration and rigid format of a conference presentation an imperfect solution to these firms' information problems. Analyst/investor days and conference presentations tend to occur in different quarters, consistent with their competing for the time and attention of senior management. When these two mediums are scheduled in close temporal proximity to each other, analyst/ investor days diminish the information content of conference presentations, but not vice versa, consistent with managers' favoring analyst/investor days over conference presentations as a disclosure medium. [ABSTRACT FROM AUTHOR]

The literature on intelligence analysis has a glaring hole: assessment of the management of analysts and their work. This gap is striking because managers influence all aspects of analysis and share responsibility with analysts for analytic successes and failures. While many managers ably recruit, train, mentor, and manage their analysts, they also are responsible for pathologies that negatively affect analysis and are often incorrectly attributed to analysts. Accurate understanding of the roles and influence of managers should change scholars’ views of the processes of analysis and better balance attention on analysts and managers. [ABSTRACT FROM PUBLISHER]

Purpose To explain recent guidance released by the Financial Industry Regulatory Authority (FINRA) regarding research analyst conflicts of interest that arise during the underwriter selection process.Design/methodology/approach The article discusses the risks associated with different communications between research analysts and issuers during the three phases of the underwriter selection process: the pre-IPO period; the solicitation period; and the post-mandate period.Findings While many questions remain, the FINRA guidance provides valuable insight to firms regarding the types of communications between research analysts and issuers that are permitted during different periods in the solicitation process. The risk levels associated with different types of communications during those time periods range from low to high to “unmanageable”. The article provides practical guidance on what research analysts can say and do during the different periods.Practical implications Broker-dealers should evaluate their policies and procedures to ensure compliance with the new FINRA guidelines.Originality value Practical guidance from experienced securities lawyers who are on the front lines in dealing with these issues. [ABSTRACT FROM AUTHOR]