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When Do Sell-Side Analyst Reports Really Matter? Shareholder Protection, Institutional Investors and the Informativeness of Equity Research

European Financial Management, Forthcoming

Midwest Finance Association 2013 Annual Meeting

48 Pages Posted: 24 Apr 2012 Last revised: 23 Jul 2013

Daniel Arand

University of Giessen - Department of Financial Services

Alexander Gabriel Kerl

University of Giessen - Department of Financial Services

Andreas Walter

University of Giessen - Department of Financial Services

Multiple version iconThere are 2 versions of this paper

Date Written: May 1, 2013

Abstract

We examine whether the informativeness of sell-side analyst reports depends on the strength of the regulatory environment of a country and the regulatory background of the institutional investors of a company. Our analyses are based on more than 600,000 analyst reports from 2005 through 2010 from eight leading capital markets (the U.S., the EU5, Switzerland and Japan).

Based on both measures that we use to proxy the informativeness of analyst research (i.e., short-term market reaction and forecast errors with respect to corporate earnings and target prices), our results show that the information value of research increases as the level of investor protection increases. This result is robust to different specifications of investor protection. We further demonstrate that analyst forecasts are more (less) valuable when the majority of institutional investors are from strong (weak) investor protection countries.

Keywords: shareholder protection, institutional investors, analyst reports, regulation

JEL Classification: G14, G15, G18, G24, G32

Suggested Citation

Arand, Daniel and Kerl, Alexander Gabriel and Walter, Andreas, When Do Sell-Side Analyst Reports Really Matter? Shareholder Protection, Institutional Investors and the Informativeness of Equity Research (May 1, 2013). European Financial Management, Forthcoming; Midwest Finance Association 2013 Annual Meeting. Available at SSRN: https://ssrn.com/abstract=2044548 or http://dx.doi.org/10.2139/ssrn.2044548

Daniel Arand

University of Giessen - Department of Financial Services ( email )

Licher Str, 74
Giessen, 35394
Germany

Alexander Gabriel Kerl (Contact Author)

University of Giessen - Department of Financial Services ( email )

Licher Str, 74
Giessen, 35394
Germany

Andreas Walter

University of Giessen - Department of Financial Services ( email )

Betriebswirtschaftslehre V
Giessen, 35394
Germany

HOME PAGE: http://wiwi.uni-giessen.de/ma/dat/walter/Andreas_Walter/

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