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The purpose of this paper is to examine analyst followings of firms starting from one year prior to their filing for Chapter 11 and as the firms progress through bankruptcy proceedings with a focus on firms receiving “Hold” or better recommendations. The authors attempt to answer questions such as what the common characteristics of the firms receiving stronger than expected recommendations one year prior to filing for bankruptcy reorganization or while in bankruptcy are, and how the market reacts to the issuance of stronger ratings for those firms.

The authors design various regressions and apply them to a total of 2,754 sell-side analyst recommendations and 325 firms that are either approaching bankruptcy filing or in the process of reorganizing. In each analysis, the authors control for several firm and performance characteristics.

The authors find that the probability of securing stronger ratings is higher for small firms and for those followed by a greater number of analysts than for large firms and firms followed by fewer analysts. The market becomes more skeptical of optimistic evaluations closer to the date of bankruptcy filing (perhaps reflecting some anticipation) and reacts more positively to rating upgrades issued during bankruptcy protection than to the upgrades issued before the bankruptcy filing.

The conclusions are based on the analysis of analyst recommendations issued shortly before Chapter 11 filings and during bankruptcy proceedings. The conclusions could be strengthened by further analysis of firms’ post-bankruptcy recovery and performance and examination of analyst recommendations issued for the firms after they emerge from Chapter 11..

Analyst security ratings that are more positive than expected are perhaps the result of superior expertise and access to private information. During bankruptcy proceedings, when information disclosure is limited, investors could greatly benefit from reports issued by security analysts.

This study contributes to the literature in a number of ways. First, the authors contribute to the literature on the analyst ratings of firms in distress by considering the period between bankruptcy filing and emergence, while the existing literature provides analysis of pre-bankruptcy recommendations and forecasts. Second, the authors focus on better than expected ratings rather than all types of ratings as the firms approach bankruptcy filings and proceed through reorganization. Finally, they evaluate how investors react to stronger than expected analyst ratings.

More studies have investigated the relation between option measures and stock returns during scheduled corporate events. This study adds to the literature and investigates the informational role of options concerning stock returns following unscheduled corporate news events. The authors focus on individual analysts' recommendation changes rather than consensus revisions, as the recommendation consensus might discard a large amount of potentially valuable information in the aggregation process.

Based on the econometric model, the authors follow Bakshi et al. (2003) to construct the model-free option implied measures. The authors further decompose the implied option variance into upside and downside components. In such a way, the different informational roles of call and put options can be distinguished. A variety of regression analyses are conducted to examine the predictive power of option implied measures, and the ordered probit model is used to test the tipping hypothesis of analyst recommendations.

This study’s results show that the option market impounds the “valuable” firm-specific news; thus, the pre-event option market is strongly related to stock returns around recommendations even though recommendation changes are largely “unscheduled”. At the same time, these results suggest that upside (good) and downside (bad) implied volatilities contain distinctive information on subsequent stock returns.

This study provides new evidence that an increase in upside (downside) volatility around analyst recommendation changes would increase the probability that analysts upgrade (downgrade) the stock. The findings provide implications for investors and risk managers in making investment decisions.

Corporate investment behavior increases the uncertainty of a company’s operation and performance. The purpose of this paper is to investigate how analyst recommendations respond to corporate uncertainty caused by investment behavior and what motivates analysts to react as they do.

The authors test two motivation hypotheses: the hypothesis that analysts are currying favor with management to obtain private information and the hypothesis that analysts have conflicts of interest due to connections. Using Chinese analyst-level data from 2007 to 2015, the authors find that overall investment levels, R&D investment and M&A events are significantly positively correlated with analyst recommendations, suggesting that analysts tend to react optimistically to corporate investment behavior.

Analysts are only optimistic about companies with low information transparency, suggesting that analysts may be trying to curry favor with management to gain access to private information. The authors find that analysts with stronger recommendations have more private information and analysts with more private information publish more accurate earnings forecasts, which supports the hypothesis that analysts curry favor with management through optimistic recommendations to obtain more private information. This is consistent with the logic that the difficulty of earnings forecasting increases under uncertain conditions, increasing the demand for private information. The authors then group the analysts according to their underwriting connections, securities company’s proprietary connections and fund connections, and find that the positive correlation between corporate investment behavior and analyst recommendations exists only in the unconnected groups. This is evidence against the hypothesis that analysts have conflicts of interest due to their connections.

First, the authors link the optimism of analysts with the uncertainty of analysts’ information inputs to partially unpack the black box of analysts’ analyses. Second, the authors test the two hypotheses mentioned. There is a lack of comparative studies on the influence of different motivations on the behavior of analysts.

The purpose of this paper is to investigate what and how intellectual capital information (ICI) conveyed through analyst reports varies by the type of stock recommendation. It draws on the theory of impression management.

Content analysis is used to investigate ICI in the full text of sell‐side analysts’ initiating coverage reports. It categorises ICI by type and three qualitative characteristics: evidence; time orientation; and news‐tenor. It explores how the extent, types and qualitative characteristics of ICI found in analyst reports vary by the type of stock recommendation accompanying the analyst report.

Given the conflicting interests facing analysts and relative amenability of ICI, it was found that analysts use ICI to manage perceptions. In particular, analysts attempt to use ICI in their reports to subdue the pessimism associated with an unfavourable recommendation, increase credibility of favourable recommendations and distinguish sell from hold recommendations.

The paper contributes to the literature on impression management by extending its application to the study of sell‐side analysts’ decision processes and it alerts future researchers to the wider role played by ICI beyond its use in generation of forecasts and valuations. The paper's findings have implications for consumers of analyst reports, as the level of negativity/positivity of forecasts and recommendations may be altered as a result of the semantics associated with ICI.

This paper explores analysts’ use of ICI conditional on the type of stock recommendation accompanying the report. Findings are explained using the theory of impression management.

Using a sample of UK FTSE 350 companies continuously listed in the period 2007-2011, this paper aims to investigate the impact of the quality and quantity of corporate environmental disclosure on analysts’ recommendations.

The study adopted a method based on that developed by Beck et al. (2010). The “CONI” approach measures information diversity, content and volume. It involves dual qualitative and quantitative measurement, which is suitable for the purpose of this paper.

The findings suggest that the quality of environmental disclosure is associated with more favourable buy recommendations. Mere volume of disclosure is insufficient for effective signalling about environmental strategies. Further tests show that only discretionary quality disclosure that is influenced by managerial intervention receives optimistic recommendation, suggesting that analysts are more likely to give better recommendation when managers have a higher level of discretion in their disclosures.

This paper contributes to the academic literature by empirically examining the association between sell-side analyst recommendations on both innate and discretionary components of environmental disclosures (quality and volume) within the UK context. This is a significant extension of the existing literature, which has focused on the related association between analyst recommendations and corporate social responsibility, mainly measured by corporate social responsibility ratings or a dummy variable reflecting the existence of supplementary corporate social responsibility reports in different international setting. The topic is of interest to contemporary accounting scholars and responds to calls for more research into how analysts use nonfinancial data such as environmental data in making recommendations.

This paper aims to document the impact of Ramadan on the optimism of analysts’ recommendations taking as a sample the countries of the MENA region during the period between 2004 and 2015. The choice of these countries can be explained by the fact that their population is predominantly of a Muslim faith (The Future of World Religions: Population Growth Projections, 2010-2050, 2015).

The authors used univariate and multivariate regression models to highlight the existence of the Ramadan effect on the optimism of analysts. They have found that pre-holiday optimism is significantly lower than post-holiday optimism.

This paper also documented the effect of analysts’ experience and information uncertainty on the analysts’ optimism level that allowed us to infer that low experience enhances optimism, while environment with low information uncertainty tends to decrease the level of optimism.

Previous research on this topic has investigated the effect of months of the year, turns of the month and days-of-the-week on the behavior of stock exchanges. Another strand of the literature also analyzed the effect of holidays on the latter. However, this is the first attempt to investigate this effect on analysts’ recommendations optimism when the holiday period is related to Islam.

This study aims to examine whether co-opted directors influence analysts’ recommendations. As information intermediaries, financial analysts should incorporate the quality of corporate governance into their valuation because well-governed firms are associated with lower agency costs and better performance. Co-opted directors are those appointed after the incumbent chief executive officer assumes office. The authors investigate whether board co-option has an effect on analyst recommendations.

The present study uses univariate analysis, multi-variate regression analysis and conduct a natural experiment using the Sarbanes-Oxley as an exogenous shock.

The results show that firms with fewer co-opted directors tend to receive more favorable recommendations, suggesting that analysts favor firms with strong corporate governance. The results hold even after controlling for various firm characteristics, including the traditional measures of board quality, i.e. board size and independent directors.

The paper is the first of its kind and offers evidence on the effect of co-opted directors on analyst recommendations. The results contribute to the literature both in corporate governance and in financial intermediaries, where analysts play a crucial role in providing information to the various participants in financial markets.

The purpose of this paper is to examine the influence of financial restatements on the sell-side analysts' stock recommendations.

The sample of this study is based on a dataset from a panel of 246 Malaysian public listed companies for the period 2008 to 2013 (651 company-year observations). This study employs feasible generalized least squares regression.

This study finds a negative and significant relationship between restated companies and sell-side analysts' stock recommendations, which means that sell-side analysts issue less favorable stock recommendations for restated companies.

The findings based on observations from an emerging economy complement the results of the US studies that analysts revise their earnings forecasts or recommendations downwards or drop coverage following financial restatements. The results of this study should be useful to capital market participants in understanding how analysts perceive and evaluate restated companies.

This paper expands the literature on financial restatements consequences in an emerging market which is largely unstudied. Prior research on analyst behavior towards restatements has focused on the consequences of restatements in terms of analyst following and forecast accuracy and dispersion. This study examines if and how the restatements affect the analysts' final output as reflected in the recommendation opinion, an area that has so far received little attention.

In this study, I investigate analysts’ ability to process public information for investors by examining price reactions to a sample of analysts’ recommendation revisions issued shortly after quarterly earnings announcements. I find that these recommendation revisions are used by investors to reassess the valuation implications of announced earnings. Confirmatory (contradictory) recommendation revisions that have the same (opposite) sign as prior earnings surprises can cause investors to revise their beliefs about the valuation implications of announced earnings upward (downward) and thus cause price reactions that are positively (negatively) associated with prior earnings surprises. In addition, I find that as the information complexity of earnings announcements gets higher, these recommendation revisions play a more important role in helping investors understand the valuation implications of announced earnings. Finally, I find that analysts’ ability to interpret the valuation implications of announced earnings for investors has remained at a similar level since the adoption of Regulation Fair Disclosure. Overall, this study provides additional evidence on how analysts help improve corporate information environment.

The purpose of this paper is to document the performance of analysts' recommendations for shariah-compliant firms and non-shariah-compliant firms in the MENA region during the period between 2005 and 2009.

This paper uses post-recommendation market-adjusted returns as a measure of performance and computes returns for different holding periods. Significant positive (negative) returns following buy (sell) recommendation will indicate value relevance of these recommendations.

The results show that analysts are not able to make any value relevant recommendations for shariah-compliant firms. The author documents insignificant returns following analysts' buy and sell recommendations for shariah-compliant firms. In contrast to their performance for shariah-compliant firms, the results show that analysts are able to produce value relevant recommendations for non-shariah-complaint firms. The author reports significant returns following analysts' buy recommendations for non-shariah-complaint firms. The author also reports significantly positive spread between returns following analysts' buy and sell recommendations for non-shariah-compliant firms. Positive spread indicates that analysts are able to differentiate between well-performing and badly-performing non-shariah-compliant firms. Interestingly, in case of sell recommendations, the results show no significant value in analysts' sell recommendations for non-shariah-complaint firms.

The results imply that investors should not blindly follow analyst recommendations for shariah-compliant firms while making their investment decisions in the MENA region.

This paper makes detailed analysis of analyst recommendations for shariah-compliant firms and non-shariah-compliant firms in previously unexplored MENA region.