Endogenous Entry/Exit as an Alternative Explanation for the Disciplining Role of Independent Analysts

15 Pages Posted: 13 Nov 2007

Date Written: November 6, 2007

Abstract

Gu and Xue (this issue) study the disciplining effect of independent analysts on the accuracy and forecast relevance of the forecasts of non-independent analysts. One of the intriguing results is that while independent analysts issue inferior forecasts, their presence appears to reduce the forecast bias, improve the forecast accuracy and increase the forecast relevance of forecasts issued by non-independent analysts. We explore alternative explanations for the Gu-Xue results. Our evidence of endogenous entry and exit of independent analysts provides a more compelling explanation for the reported results.

Keywords: independent analysts, forecast accuracy, endogenous entry

JEL Classification: G28, G29, M41, M43

Suggested Citation

Lys, Thomas Z. and Sunder, Jayanthi, Endogenous Entry/Exit as an Alternative Explanation for the Disciplining Role of Independent Analysts (November 6, 2007). Available at SSRN: https://ssrn.com/abstract=1028554 or http://dx.doi.org/10.2139/ssrn.1028554

Thomas Z. Lys (Contact Author)

Northwestern University - Kellogg School of Management ( email )

2001 Sheridan Road
Department of Accounting & Information Systems
Evanston, IL 60208
United States
847-491-2673 (Phone)
847-467-1202 (Fax)

Jayanthi Sunder

University of Arizona - Eller College of Management ( email )

School of Accountancy
1130 E Helen St.
Tucson, AZ 85721
United States
520-626-8489 (Phone)

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