Abstract

http://ssrn.com/abstract=1344032
 
 

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Do Financial Analysts Restrain Insiders' Informational Advantage?


Marios A. Panayides


University of Pittsburgh - Katz Graduate School of Business

Andrew Ellul


Indiana University - Kelley School of Business - Department of Finance

February 15, 2009

EFA 2009 Bergen Meetings Paper

Abstract:     
We investigate the competitive relationship between financial analysts and firm insiders for price-sensitive information. We identify the influence of this competition on trade dynamics by empirically examining the impact of complete analysts’ coverage termination on stocks’ liquidity, price discovery and insider trading. Termination leads to a deterioration in liquidity and price efficiency, an increase in information asymmetries, and higher profitability of insider trades. Importantly, the magnitude of these effects depends on insiders’ presence. Institutional investors alleviate, but do not eliminate, the effects of coverage termination. Overall, this evidence indicates that analysts contribute to market quality through competition with insiders.

Number of Pages in PDF File: 70

Keywords: Sell-side research, Insiders, Insider Trading, Information Asymmetries, Liquidity

JEL Classification: D14, G24, D82


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Date posted: February 19, 2009 ; Last revised: May 12, 2014

Suggested Citation

Panayides, Marios A. and Ellul, Andrew, Do Financial Analysts Restrain Insiders' Informational Advantage? (February 15, 2009). EFA 2009 Bergen Meetings Paper. Available at SSRN: http://ssrn.com/abstract=1344032 or http://dx.doi.org/10.2139/ssrn.1344032

Contact Information

Marios A. Panayides
University of Pittsburgh - Katz Graduate School of Business ( email )
372 Mervis Hall
Pittsburgh, PA 15260
United States
Andrew Ellul (Contact Author)
Indiana University - Kelley School of Business - Department of Finance ( email )
1309 E. 10th St.
Bloomington, IN 47405
United States

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