Do Opinions on Financial Misstatement Firms Affect Analysts’ Reputation with Investors? Evidence from Reputational Spillovers

48 Pages Posted: 1 Mar 2016

See all articles by Lian Fen Lee

Lian Fen Lee

Boston College - Carroll School of Management

Alvis K. Lo

Boston College

Date Written: February 28, 2016

Abstract

We examine whether opinions on firms subsequently revealed to have misstated earnings affect analysts’ reputation with investors. We find that positive opinions by bullish analysts hurt their reputation, leading investors to react less to their research on non-misstatement firms after the misstatement revelation (i.e., negative spillovers). We also find that bearish analysts issuing more negative opinions gain reputation and experience positive spillovers. Finally, for analysts who dropped coverage of the misstatement firm before the misstatement revelation, we find no spillovers, which suggests that analysts experience limited reputational gains when they did not issue a public negative opinion.

Keywords: analyst reputation; financial misstatement; reputational spillover

JEL Classification: M41; G10

Suggested Citation

Lee, Lian Fen and Lo, Alvis K., Do Opinions on Financial Misstatement Firms Affect Analysts’ Reputation with Investors? Evidence from Reputational Spillovers (February 28, 2016). Available at SSRN: https://ssrn.com/abstract=2739421 or http://dx.doi.org/10.2139/ssrn.2739421

Lian Fen Lee

Boston College - Carroll School of Management ( email )

140 Commonwealth Avenue
Chestnut Hill, MA 02467
United States

Alvis K. Lo (Contact Author)

Boston College ( email )

Carroll School of Management, Fulton 542
140 Commonwealth Ave.
Chestnut Hill, MA 02467
United States
617-552-8674 (Phone)

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