The Activities of Buy-Side Analysts and the Determinants of Their Stock Recommendations

Posted: 13 Jul 2016

See all articles by Lawrence D. Brown

Lawrence D. Brown

Temple University - Department of Accounting

Andrew C. Call

Arizona State University (ASU) - School of Accountancy

Michael B. Clement

University of Texas at Austin - Department of Accounting

Nathan Y. Sharp

Texas A&M University - Department of Accounting

Multiple version iconThere are 2 versions of this paper

Date Written: July 2016

Abstract

We survey 344 buy-side analysts from 181 investment firms and conduct 16 detailed follow-up interviews to gain insights into the activities of buy-side analysts, including the determinants of their compensation, the inputs to their stock recommendations, their beliefs about financial reporting quality, and the role of sell-side analysts in buy-side research. One important finding is that 10-K or 10-Q reports are more useful than quarterly conference calls and management earnings guidance for determining buy-side analysts’ stock recommendations. Our results also suggest that sell-side analysts add value by providing buy-side analysts with in-depth industry knowledge and access to company management.

Keywords: Buy-Side Analysts, Stock Recommendations, Compensation, Sell-Side Analysts, Private Communication, Industry Knowledge

JEL Classification: G10, G11, G23, M40

Suggested Citation

Brown, Lawrence D. and Call, Andrew C. and Clement, Michael B. and Sharp, Nathan Y., The Activities of Buy-Side Analysts and the Determinants of Their Stock Recommendations (July 2016). Journal of Accounting & Economics (JAE), Forthcoming. Available at SSRN: https://ssrn.com/abstract=2808634

Lawrence D. Brown

Temple University - Department of Accounting ( email )

Philadelphia, PA 19122
United States

Andrew C. Call

Arizona State University (ASU) - School of Accountancy ( email )

Tempe, AZ 85287
United States

Michael B. Clement (Contact Author)

University of Texas at Austin - Department of Accounting ( email )

2110 Speedway, Stop B6400
Austin, TX 78712
United States
512-471-0332 (Phone)
512-471-3904 (Fax)

Nathan Y. Sharp

Texas A&M University - Department of Accounting ( email )

4353 TAMU
College Station, TX 77843-4353
United States
979-845-0338 (Phone)

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