The Effects of Analyst-Country Institutions on Biased Research: Evidence from Target Prices

51 Pages Posted: 12 Oct 2018

See all articles by Mark T Bradshaw

Mark T Bradshaw

Boston College

Alan Guoming Huang

University of Waterloo

Hongping Tan

McGill University

Multiple version iconThere are 2 versions of this paper

Date Written: September 20, 2018


Prior research demonstrates that a strong institutional infrastructure in a country moderates self-serving behavior of market participants. Cross-country economic activities have increased significantly, presenting a research opportunity to examine the relative influence of local versus foreign institutional infrastructure on individual market participants. We utilize variation in analyst-country location relative to covered firm-location to examine institutional determinants of optimism in analyst research. Focusing on target prices, where persistent optimism is well documented, we find that analysts domiciled in countries with stronger institutional infrastructures exhibit significantly attenuated target price optimism and more value-relevant target prices. Our results demonstrate the importance of domestic country-level institutional factors in moderating self-serving behavior by market participants engaged in cross-country activities.

Keywords: financial analyst, target price, optimism, analyst country, institutional infrastructure, investor protection, legal enforcement, self-serving behavior, stock returns

JEL Classification: G24, G30, K40, M16

Suggested Citation

Bradshaw, Mark T and Huang, Alan G. and Tan, Hongping, The Effects of Analyst-Country Institutions on Biased Research: Evidence from Target Prices (September 20, 2018). Journal of Accounting Research, Forthcoming. Available at SSRN:

Mark T Bradshaw

Boston College ( email )

140 Commonwealth Avenue
Chestnut Hill, MA 02467
United States

Alan G. Huang (Contact Author)

University of Waterloo ( email )

School of Accounting and Finance
Waterloo, Ontario N2L 3G1
519-888 4567 ext. 36770 (Phone)

Hongping Tan

McGill University ( email )

1001 Sherbrooke St. West
Montreal, Quebec H3A1G5 H3A 2M1

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