Political Contributions and Analyst Behavior
57 Pages Posted: 3 Oct 2010 Last revised: 8 Mar 2016
Date Written: June 25, 2015
We show that the personal traits of analysts, as revealed by their political donations, influence their forecasting behavior and stock prices. Analysts who contribute primarily to the Republican Party adopt a more conservative forecasting style. Their earnings forecast revisions are less likely to deviate from the forecasts of other analysts and are less likely to be bold. Their stock recommendations also contain more modest upgrades and downgrades. Overall, these analysts produce better quality research, which is recognized and rewarded by their employers, institutional investors, and news media. Stock market participants, however, do not fully recognize their superior ability as the market reaction following revisions by these analysts is weaker.
Keywords: Equity Analysts, Political Contribution, Conservative Analysts, Forecasting Style, Market Reaction
JEL Classification: G14, G24, M41
Suggested Citation: Suggested Citation