Analysts’ Cultural Attitudes to Time Orientation

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See all articles by Shuping Chen

Shuping Chen

University of Texas at Austin - Red McCombs School of Business

Jay Jung

City, University of London - Cass Business School

Sonya S. Lim

DePaul University - Department of Finance

Yong Yu

University of Texas at Austin

Date Written: March 9, 2020

Abstract

We study how analysts’ cultural attitudes to time orientation affect their production of long-term earnings forecasts, the profitability of their stock recommendations, and managerial myopia for the firms they cover. We find that analysts from a long-term oriented culture produce more long-term earnings forecasts, issue more timely long-term forecasts and more profitable stock recommendations. These results are more pronounced among firms with more long-term investments, for smaller firms, and during periods of higher economic uncertainty. Exploring the quasi-natural experiments of brokerage houses’ mergers and closures, we find a positive and plausibly causal effect of the coverage by long-term oriented analysts on firm innovation. Contrary to extant research finding that analysts’ coverage in general fosters managerial myopia, our paper shows that the coverage of long-term oriented analysts ameliorates managerial myopia.

Keywords: Cultural heritage, Long-term orientation, Earnings forecast, Stock recommendation, Firm innovation, Managerial myopia

JEL Classification: G24, G41, J15, O31

Suggested Citation

Chen, Shuping and Jung, Jay Heon and Lim, Sonya S. and Yu, Yong, Analysts’ Cultural Attitudes to Time Orientation (March 9, 2020). Available at SSRN: https://ssrn.com/abstract=

Shuping Chen

University of Texas at Austin - Red McCombs School of Business ( email )

Austin, TX 78712
United States
521.471.5328 (Phone)

Jay Heon Jung (Contact Author)

City, University of London - Cass Business School ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom

HOME PAGE: http://www.jayheonjung.com

Sonya S. Lim

DePaul University - Department of Finance ( email )

1 East Jackson Blvd.
Chicago, IL 60604-2287
United States

HOME PAGE: http://sites.google.com/site/sonyalim/

Yong Yu

University of Texas at Austin ( email )

1 University Station B6400
Austin, TX 78712
United States
(512)471-6714 (Phone)
(512)471-3904 (Fax)

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