Do Analyst Recommendations Reflect Shareholder Rights?

31 Pages Posted: 5 Nov 2007 Last revised: 5 Dec 2012

Don M. Autore

Florida State University - College of Business

Tunde Kovacs

University of Massachusetts Lowell

Vivek Singh

University of Michigan at Dearborn - College of Business

Multiple version iconThere are 2 versions of this paper

Date Written: April 10, 2008

Abstract

We examine whether sell-side analyst recommendations reflect shareholder rights. Our rationale is that analysts should be influenced by external governance only if market participants do not efficiently price its value. We find that stronger shareholder rights are associated with more favorable recommendations. Further analysis reveals that analysts favor firms with strong shareholder rights only when strong rights appear to be warranted, but do not penalize firms for having strong rights when not needed. These findings occupy middle ground in the debate on the pricing efficiency of shareholder rights. Moreover, we find that firm value is positively associated with the strength of shareholder rights regardless of the expected external governance structure. The latter result is consistent with a "one-size-fits-all" interpretation, and implies that firms across the board should reduce their number of anti-takeover provisions.

Keywords: analyst recommendations, corporate governance, shareholder rights, anti-takeover provisions, market efficiency

JEL Classification: G24, G29, G34, G14

Suggested Citation

Autore, Don M. and Kovacs, Tunde and Singh, Vivek, Do Analyst Recommendations Reflect Shareholder Rights? (April 10, 2008). Available at SSRN: https://ssrn.com/abstract=1025627 or http://dx.doi.org/10.2139/ssrn.1025627

Don M. Autore

Florida State University - College of Business ( email )

821 ACADEMIC WAY, Room 314 RBA
P.O. Box 3061110
Tallahassee, FL 32306-1110
United States
850-644-7857 (Phone)

Tunde Kovacs (Contact Author)

University of Massachusetts Lowell ( email )

1 University Ave
Lowell, MA 01854
United States

Vivek Singh

University of Michigan at Dearborn - College of Business ( email )

19000 Hubbard Drive
FCS
Dearborn, MI 48126
United States
313-583-6533 (Phone)
313-271-9837 (Fax)

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