Abstract

http://ssrn.com/abstract=2433019
 


 



Does Equity Analyst Research Lack Rigor and Objectivity? Evidence from Conference Call Questions and Research Notes


Catherine Salzedo


Lancaster University - Department of Accounting and Finance

Steven Young


Lancaster University - Department of Accounting and Finance

Mahmoud El-Haj


Lancaster University - School of Computing and Communications

May 5, 2014


Abstract:     
Research questions the rigor and objectivity of analysts’ research due to the institutional structures in which they operate (Fogarty and Rogers, 2005 Accounting, Organisations and Society). However, insights from psychology highlight the need to condition this conclusion on the incentives for attributional search. Based on social cognition theory, we test whether the degree of diligence and criticality evident in analyst research is higher (lower) for negative (non-negative) schema-discrepant events. We evaluate this prediction against the null hypothesis that analyst research consistently lacks rigor and objectivity. We use earnings surprises as our schema-discrepant conditioning event, and examine the content of analysts’ conference call questions and research notes to assess the properties of their research. We find that levels of rigor and objectivity are statistically and economically higher for research conducted in response to negative earnings surprises. Findings are consistent with analysts’ innate cognitive processing response counteracting institutional considerations when attributional search incentives are strong. Results also reveal non-trivial levels of rigor and objectivity in response to non-negative schema-discrepant earnings news. Differences in the properties of analysts’ work are also evident for spoken and written modalities.

Number of Pages in PDF File: 50

Keywords: Conference calls, research notes, earnings surprises

JEL Classification: G3, M4

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Date posted: May 6, 2014  

Suggested Citation

Salzedo, Catherine and Young, Steven and El-Haj, Mahmoud, Does Equity Analyst Research Lack Rigor and Objectivity? Evidence from Conference Call Questions and Research Notes (May 5, 2014). Available at SSRN: http://ssrn.com/abstract=2433019 or http://dx.doi.org/10.2139/ssrn.2433019

Contact Information

Catherine Salzedo
Lancaster University - Department of Accounting and Finance ( email )
Lancaster, Lancashire LA1 4YX
United Kingdom
+44(0) 1524 592735 (Phone)
Steven Young (Contact Author)
Lancaster University - Department of Accounting and Finance ( email )
The Management School
Lancaster LA1 4YX
United Kingdom
+441 5245-94242 (Phone)
+441 5248-47321 (Fax)
Mahmoud El-Haj
Lancaster University - School of Computing and Communications ( email )
InfoLab21
Bailrigg
Lancaster, LA1 4WA
United Kingdom
+44 1524-510348 (Phone)
HOME PAGE: http://www.lancaster.ac.uk/staff/elhaj/
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