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Political Contributions and Analyst Behavior

57 Pages Posted: 3 Oct 2010 Last revised: 8 Mar 2016

Danling Jiang

College of Business, Stony Brook University; School of Economics and Management, Southwest Jiaotong University

Alok Kumar

University of Miami - School of Business Administration

Kelvin Law

Nanyang Technological University (NTU)

Date Written: June 25, 2015

Abstract

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

Jiang, Danling and Kumar, Alok and Law, Kelvin, Political Contributions and Analyst Behavior (June 25, 2015). Review of Accounting Studies, 2016, 21(1): 37-88. Available at SSRN: https://ssrn.com/abstract=1686238 or http://dx.doi.org/10.2139/ssrn.1686238

Danling Jiang

College of Business, Stony Brook University ( email )

306 Harriman Hall
Stony Brook, NY 11794
United States

HOME PAGE: http://sites.google.com/site/danlingjiang

School of Economics and Management, Southwest Jiaotong University ( email )

Chengdu, Sichuan
China

HOME PAGE: http://userweb.swjtu.edu.cn/Userweb/jiangdanling/index.htm

Alok Kumar (Contact Author)

University of Miami - School of Business Administration ( email )

514 Jenkins Building
Department of Finance
Coral Gables, FL 33124-6552
United States
305-284-1882 (Phone)

HOME PAGE: http://moya.bus.miami.edu/~akumar

Kelvin Law

Nanyang Technological University (NTU) ( email )

Nanyang Business School
Singapore, 639798
Singapore

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