Analyst Activity Around the World

47 Pages Posted: 27 Feb 2000

See all articles by James J. Chang

James J. Chang

University of Pennsylvania - The Wharton School

Tarun Khanna

Harvard University - Strategy Unit

Krishna Palepu

Harvard University - Harvard Business School; Harvard University - David Rockefeller Center for Latin American Research; Harvard Business Review; NBER; International Academy of Management

Date Written: January 23, 2000

Abstract

In this paper we provide evidence on analyst activity and performance in 47 countries around the world, including several emerging market economies. Our empirical analysis first demonstrates wide variation in the extent and accuracy of analyst activity across our sample countries. A handful of country-specific measures, such as the average firm size, the size of the stock market relative to country GDP, the quality of accounting disclosures, and the country's legal origin, explain a sizeable part of this variation. For a subset of 15 emerging markets in Asia and Latin America, we also investigate the proposition that the business groups, commonly found in these regions, which often take the form of pyramidal ownership structures, hamper analyst activity and their forecast performance. We find that, after controlling for other factors, the earnings of group affiliates are indeed harder to forecast than those of unaffiliated firms. However, group affiliates are more likely to be followed by analysts. Our analysis also shows that the magnitude of the group effect is small, and that it is overshadowed by country-specific contextual factors. Overall, our results are consistent with the view that the transparency problem in an economy is primarily influenced by its legal and information context, rather than by how companies are organized in the economy.

JEL Classification: G29, G32, G38, L20, P50, M41, M45

Suggested Citation

Chang, James and Khanna, Tarun and Palepu, Krishna, Analyst Activity Around the World (January 23, 2000). HBS Strategy Unit Working Paper No. 01-061. Available at SSRN: https://ssrn.com/abstract=204570 or http://dx.doi.org/10.2139/ssrn.204570

James Chang (Contact Author)

University of Pennsylvania - The Wharton School ( email )

3641 Locust Walk
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215-898-2610 (Phone)
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Tarun Khanna

Harvard University - Strategy Unit ( email )

Harvard Business School
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United States
617-495-6038 (Phone)
617-495-0355 (Fax)

Krishna Palepu

Harvard University - Harvard Business School ( email )

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Morgan 270C
Boston, MA 02163
United States
617-495-6759 (Phone)
617-496-7363 (Fax)

HOME PAGE: http://drfd.hbs.edu/fit/public/facultyInfo.do?facInfo=pub&facId=6527

Harvard University - David Rockefeller Center for Latin American Research ( email )

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Cambridge, MA 02138
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HOME PAGE: http://www.drclas.harvard.edu/faculty/directory/professors/view/150

Harvard Business Review ( email )

Boston, MA
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HOME PAGE: http://hbr.org/authors/palepu

NBER ( email )

1050 Massachusetts Avenue
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HOME PAGE: http://www.nber.org/people/krishna_palepu

International Academy of Management ( email )

Avenida Pearson 21
Barcelona, 08034
Spain

HOME PAGE: http://theiam.ws/?person=palepu-krishna

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