Do Investors Affect Financial Analysts’ Behaviors? Evidence from Short Sellers

53 Pages Posted: 14 Dec 2014 Last revised: 19 Dec 2020

See all articles by Yun Ke

Yun Ke

Brock University - Goodman School of Business; University of Texas at El Paso - Department of Accounting & Information Systems

Kin Lo

University of British Columbia (UBC) - Sauder School of Business

Jinfei Sheng

University of California, Irvine - Paul Merage School of Business

Jenny Li Zhang

University of British Columbia - Sauder School of Business

Date Written: December 18, 2020

Abstract

We examine how short sellers affect financial analysts’ forecast behaviors using a natural experiment that relaxes short-sale constraints. We find that increased ease of short selling improves analyst earnings forecast quality by reducing the forecast bias and increasing the forecast accuracy. The improvements can be explained by both the disciplining pressure from short-sellers and increased price efficiency from incorporating information in a timely manner. While it is well-documented that financial analysts can affect investors, our paper provides novel evidence on how sophisticated investors–short sellers–can affect analysts’ behaviors.

Keywords: Analyst forecast, short sellers, disciplining effect

Suggested Citation

Ke, Yun and Lo, Kin and Sheng, Jinfei and Zhang, Jenny Li, Do Investors Affect Financial Analysts’ Behaviors? Evidence from Short Sellers (December 18, 2020). Available at SSRN: https://ssrn.com/abstract=2537553 or http://dx.doi.org/10.2139/ssrn.2537553

Yun Ke (Contact Author)

Brock University - Goodman School of Business ( email )

500 Glenridge Avenue
International Business and Strategy
St. Catherine's, Ontario L2S 3A1
Canada

University of Texas at El Paso - Department of Accounting & Information Systems ( email )

University Library - Acquisitions Department
500 West University Avenue
El Paso, TX 79968
United States

Kin Lo

University of British Columbia (UBC) - Sauder School of Business ( email )

2053 Main Mall
Vancouver, BC V6T 1Z2
Canada
604-822-8430 (Phone)
604-822-9470 (Fax)

HOME PAGE: http://www.sauder.ubc.ca/Faculty/People/Faculty_Members/Lo_Kin

Jinfei Sheng

University of California, Irvine - Paul Merage School of Business ( email )

4291 Pereira Dr
Irvine, CA 92697
United States

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

Jenny Li Zhang

University of British Columbia - Sauder School of Business ( email )

2053 Main Mall
Vancouver, BC V6T 1Z2
Canada

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