Political Contributions and Analyst Behavior
College of Business, SUNY at Stony Brook; Florida State University - The College of Business
University of Miami - School of Business Administration
Nanyang Technological University (NTU)
June 25, 2015
Review of Accounting Studies, 2016, 21(1): 37-88
We show that the personal traits of analysts, as revealed by their political donations, influence their forecasting behavior and stock prices. Analysts who contribute primarily to the Republican Party adopt a more conservative forecasting style. Their earnings forecast revisions are less likely to deviate from the forecasts of other analysts and are less likely to be bold. Their stock recommendations also contain more modest upgrades and downgrades. Overall, these analysts produce better quality research, which is recognized and rewarded by their employers, institutional investors, and news media. Stock market participants, however, do not fully recognize their superior ability as the market reaction following revisions by these analysts is weaker.
Number of Pages in PDF File: 57
Keywords: Equity Analysts, Political Contribution, Conservative Analysts, Forecasting Style, Market Reaction
JEL Classification: G14, G24, M41
Date posted: October 3, 2010 ; Last revised: March 8, 2016
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