Abstract

http://ssrn.com/abstract=386173
 
 

References (28)



 
 

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Analysts' Conflict of Interest and Biases in Earnings Forecasts


Louis K.C. Chan


University of Illinois at Urbana-Champaign - Department of Finance

Jason J. Karceski


University of Florida - Department of Finance, Insurance and Real Estate

Josef Lakonishok


University of Illinois at Urbana-Champaign; National Bureau of Economic Research (NBER)

March 2003

NBER Working Paper No. w9544

Abstract:     
Analysts' earnings forecasts are influenced by their desire to win investment banking clients. We hypothesize that the equity bull market of the 1990s, along with the boom in investment banking business, exacerbated analysts' conflict of interest and their incentives to adjust strategically forecasts to avoid earnings disappointments. We document shifts in the distribution of earnings surprises, the market's response to surprises and forecast revisions, and in the predictability of non-negative surprises. Further confirmation is based on subsamples where conflicts of interest are more pronounced, including growth stocks and stocks with consecutive non-negative surprises; however shifts are less notable in international markets.

Number of Pages in PDF File: 48

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Date posted: March 8, 2003  

Suggested Citation

Chan, Louis K.C. and Karceski, Jason J. and Lakonishok, Josef, Analysts' Conflict of Interest and Biases in Earnings Forecasts (March 2003). NBER Working Paper No. w9544. Available at SSRN: http://ssrn.com/abstract=386173

Contact Information

Louis K.C. Chan
University of Illinois at Urbana-Champaign - Department of Finance ( email )
1206 South Sixth Street
Champaign, IL 61820
United States
217-333-6391 (Phone)
217-244-3102 (Fax)
Jason J. Karceski
University of Florida - Department of Finance, Insurance and Real Estate ( email )
P.O. Box 117168
Gainesville, FL 32611
United States
352-846-1059 (Phone)
352-392-0301 (Fax)
Josef Lakonishok (Contact Author)
University of Illinois at Urbana-Champaign ( email )
1206 South Sixth Street
Champaign, IL 61820
United States
217-333-7185 (Phone)
217-244-3102 (Fax)
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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