Abstract

http://ssrn.com/abstract=1460382
 
 

References (43)



 
 

Citations (2)



 


 



The Five Stages of Analyst Careers: Coverage Choices and Changing Influence


Yinghua Li


CUNY Baruch College

P. Raghavendra Rau


University of Cambridge; UC Berkeley - Haas School of Business

Jin Xu


Purdue University - Krannert School of Management

August 24, 2009


Abstract:     
We examine changes in analysts’ monitoring incentives and effectiveness as they progress along their career paths. We find that analysts are less likely to be elected all-stars in the annual Institutional Investor elections when the firms they covered in the year prior to the election have high absolute abnormal accruals. Consistent with the hypothesis that career concerns play an important role in their coverage decisions, up and coming analysts strategically choose firms to cover. Specifically, they drop firms with high earnings management and replace them with low earnings management firms. Once they are elected all-stars and become established in their careers, they replace low earnings management firms with high earnings management firms. Firms that gain all-star coverage reduce earnings management. In addition, investors value recommendation downgrades by all-stars significantly more than downgrades by incipient stars or ex-stars, suggesting that that analyst visibility/influence, rather than analyst innate ability, is the underlying source of the effective monitoring of star analysts.

Number of Pages in PDF File: 45

Keywords: Analyst monitoring, earnings management, analyst coverage, career concerns, all-star analysts

JEL Classification: G34, M41, G24

working papers series


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Date posted: August 24, 2009 ; Last revised: November 13, 2009

Suggested Citation

Li, Yinghua and Rau, P. Raghavendra and Xu, Jin, The Five Stages of Analyst Careers: Coverage Choices and Changing Influence (August 24, 2009). Available at SSRN: http://ssrn.com/abstract=1460382 or http://dx.doi.org/10.2139/ssrn.1460382

Contact Information

Yinghua Li
CUNY Baruch College ( email )
One Bernard Baruch Way, Box B12-225
New York, NY 10010
United States
P. Raghavendra Rau (Contact Author)
University of Cambridge ( email )
Cambridge Judge Business School
Trumpington Street
Cambridge, Cambridgeshire CB21AG
United Kingdom
3103626793 (Phone)
HOME PAGE: http://www.jbs.cam.ac.uk/research/faculty/rau.html
UC Berkeley - Haas School of Business ( email )
Haas School of Business
545 Student Services Building
Berkeley, CA 94720
United States
3103626793 (Phone)
Jin Xu
Purdue University - Krannert School of Management ( email )
1310 Krannert Building
West Lafayette, IN 47907-1310
United States
765-496-2441 (Phone)
HOME PAGE: http://www.krannert.purdue.edu/faculty/xu/home.asp
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