Political Contributions, Conservatism, and Analyst Behavior
Florida State University - The College of Business
University of Miami - School of Business Administration
Tilburg University - Center and Faculty of Economics and Business Administration
December 12, 2012
McCombs Research Paper Series No. FIN-01-12
Using a unique dataset tracking the personal political contributions of sell-side equity analysts, we show that analysts who contribute primarily to the Republican Party adopt a more conservative forecasting style. Relative to other analysts, they are more cautious in incorporating new information into their earnings forecasts and stock recommendations. Their forecast revisions are smaller and less likely to be bold, and their recommendations contain modest upgrades and downgrades. Further, those forecasts are more accurate since forecast conservatism partially mitigates the adverse effects of known analyst biases. Market participants, however, do not fully recognize the potential link between political contributions and forecast accuracy. The market reaction following revisions by analysts who contribute primarily to the Republican Party is weaker even though they are more accurate. Taken together, our results suggest that conservatism, as captured by the personal political contributions of sell-side equity analysts, influences their forecasting styles and the information dissemination process.
Number of Pages in PDF File: 65working papers series
Date posted: October 3, 2010 ; Last revised: December 12, 2012
© 2013 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollo3 in 5.204 seconds