Concentrated Control, Analyst Following and Valuation: Do Analysts Matter Most When Investors are Protected Least?

44 Pages Posted: 21 Oct 2002

See all articles by Mark H. Lang

Mark H. Lang

University of North Carolina at Chapel Hill

Karl V. Lins

University of Utah - Department of Finance

Darius P. Miller

Southern Methodist University (SMU) - Finance Department

Date Written: November 2003

Abstract

This paper uses a sample of over 2,500 firms from 27 countries to investigate the relation between ownership structure, analyst following, investor protection and valuation. We find that analysts are less likely to follow firms with potential incentives to withhold or manipulate information, such as when the Family/Management group is the largest control rights blockholder. Further, this relation is stronger for firms from low shareholder protection countries. Using valuation regressions that take into account potential endogeneity between analyst following and firm value, we find a positive valuation effect when analysts cover firms that have both potentially poor internal governance and weak country-level external governance. Overall, our findings suggest that corporate governance plays an important role in analysts' willingness to follow firms and that increased analyst following is associated with higher valuations, particularly for firms likely to face governance problems.

JEL Classification: G15, G29, G32, G34, M41

Suggested Citation

Lang, Mark H. and Lins, Karl V. and Miller, Darius P., Concentrated Control, Analyst Following and Valuation: Do Analysts Matter Most When Investors are Protected Least? (November 2003). Available at SSRN: https://ssrn.com/abstract=323440 or http://dx.doi.org/10.2139/ssrn.323440

Mark H. Lang

University of North Carolina at Chapel Hill ( email )

Kenan-Flagler Business School
McColl Building
Chapel Hill, NC 27599-3490
United States
919-962-1644 (Phone)
919-962-4727 (Fax)

Karl V. Lins (Contact Author)

University of Utah - Department of Finance ( email )

David Eccles School of Business
Salt Lake City, UT 84112
United States
801-585-3171 (Phone)
801-581-7214 (Fax)

Darius P. Miller

Southern Methodist University (SMU) - Finance Department ( email )

United States

Register to save articles to
your library

Register

Paper statistics

Downloads
737
Abstract Views
5,166
rank
32,822
PlumX Metrics