42 Pages Posted: 10 Jun 2014 Last revised: 27 Mar 2016
Date Written: March 4, 2016
We document that the accrual anomaly is mitigated for firms followed by experienced analysts, suggesting a positive link between analyst quality and stock price efficiency. We examine two channels through which analysts may improve price efficiency — the research and monitoring channels. We find analysts and investors respond more positively to the accrual component of earnings for firms followed by experienced analysts, consistent with the monitoring channel, whereby experienced analysts bring about better accrual quality. Direct examination of accrual quality confirms that firms followed by experienced analysts have higher accrual quality; this holds around exogenous events of broker mergers and closures.
Keywords: Financial Analysts, Accrual Anomaly, Experience, Accrual Quality
JEL Classification: G14, G24, J24
Suggested Citation: Suggested Citation
Akyol, Ali C. and Hribar, Paul and Qian, Yiming and Yu, Frank, How Do Experienced Analysts Improve Price Efficiency? (March 4, 2016). Available at SSRN: https://ssrn.com/abstract=2448041 or http://dx.doi.org/10.2139/ssrn.2448041