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

32 Pages Posted: 2 Jun 2015

See all articles by Daniel Arand

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: June 2015

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. 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), 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

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 (June 2015). European Financial Management, Vol. 21, Issue 3, pp. 524-555, 2015, Available at SSRN: https://ssrn.com/abstract=2613175 or http://dx.doi.org/10.1111/j.1468-036X.2013.12028.x

Daniel Arand (Contact Author)

University of Giessen - Department of Financial Services ( email )

Licher Str, 74
Giessen, 35394
Germany

Alexander Gabriel Kerl

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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