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Political Contributions and Analyst Behavior

Alok Kumar

University of Miami - School of Business Administration

Danling Jiang

Florida State University - The College of Business

Kelvin Law

Tilburg University

March 31, 2015

McCombs Research Paper Series No. FIN-01-12

We show that political preferences of analysts, as revealed by their personal political contributions, are correlated with their forecasting styles and influence the information dissemination process. Politically conservative analysts, defined as those who contribute primarily to the Republican Party, exhibit more conservative forecasting styles. Their earnings forecast revisions are less likely to deviate from other analysts and less likely to be bold. Their stock recommendations also contain more modest upgrades and downgrades. Further, these politically conservative analysts produce higher quality research, which is recognized and rewarded by their employers, institutional investors, and news media. Despite their superior research quality, the market reaction following revisions by these analysts is weaker. Taken together, our findings suggest that personal traits of analysts influence their forecasting behavior, whose implications for stock prices, however, are not fully appreciated by market participants.

Number of Pages in PDF File: 68

Keywords: Political Contribution, Politically Conservative Analyst, Forecasting Style, Market Reaction

JEL Classification: G14, G24, M41

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Date posted: October 3, 2010 ; Last revised: April 1, 2015

Suggested Citation

Kumar, Alok and Jiang, Danling and Law, Kelvin, Political Contributions and Analyst Behavior (March 31, 2015). McCombs Research Paper Series No. FIN-01-12. Available at SSRN: http://ssrn.com/abstract=1686238 or http://dx.doi.org/10.2139/ssrn.1686238

Contact Information

Alok Kumar (Contact Author)
University of Miami - School of Business Administration ( email )
514 Jenkins Building
Department of Finance
Coral Gables, FL 33124-6552
United States
305-284-1882 (Phone)
HOME PAGE: http://moya.bus.miami.edu/~akumar
Danling Jiang
Florida State University - The College of Business ( email )
821 Academic Way
P.O. Box 3061110
Tallahassee, FL 32306-1110
United States
(850)645-1519 (Phone)
HOME PAGE: http://sites.google.com/site/danlingjiang
Kelvin Law
Tilburg University ( email )
P.O. Box 90153
Tilburg, 5000 LE
HOME PAGE: http://sites.google.com/site/kelvinlaw2012
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References:  77
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