Determinants of Analysts’ Dropped Coverage Decision: The Role of Analyst Incentives, Experience, and Accounting Fundamentals

Journal of Business Finance and Accounting, Forthcoming

46 Pages Posted: 9 May 2011

See all articles by John Shon

John Shon

Fordham University

Susan M. Young

Fordham University

Multiple version iconThere are 2 versions of this paper

Date Written: May 4, 2011

Abstract

After controlling for economic performance (i.e., stock returns), we find that several proxies for analyst incentives as well as accounting-based fundamentals are related to an analyst’s decision to drop coverage of a firm. When we separately consider the drop decisions of analysts with High vs. Low Experience, we find that Low Experience analysts place more weight on firm risk and decreases in liquidity when making their drop decision, while High Experience analysts place higher weights on accounting losses and decreasing SG&A margins. Lastly, when High (Low) Experience analysts initiate dropped coverage, their Low (High) Experience peers mimic the dropped coverage fairly quickly (fairly slowly).

Keywords: Analyst Coverage, Analyst Incentives, Experience, Herding

Suggested Citation

Shon, John and Young, Susan M., Determinants of Analysts’ Dropped Coverage Decision: The Role of Analyst Incentives, Experience, and Accounting Fundamentals (May 4, 2011). Journal of Business Finance and Accounting, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1831765

John Shon (Contact Author)

Fordham University ( email )

113 West 60th Street
New York, NY 10019
United States

Susan M. Young

Fordham University ( email )

1790 Broadway
Suite 11-13
New York, NY 10019
United States
646.312.8245 (Phone)
646.312.8295 (Fax)

Register to save articles to
your library

Register

Paper statistics

Downloads
164
Abstract Views
1,341
rank
180,096
PlumX Metrics