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Article
Publication date: 15 February 2016

Shahed Imam and Crawford Spence

The purpose of this paper is to shed light on the nature of the work that financial analysts actually do in the context of the market for information and to further open up…

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Abstract

Purpose

The purpose of this paper is to shed light on the nature of the work that financial analysts actually do in the context of the market for information and to further open up research in this area to qualitative and sociological inquiry.

Design/methodology/approach

A field study with 49 financial analysts (both buy-side and sell-side) was undertaken in order to understand the work that they actually do. This field study was theoretically informed by the sociology of Pierre Bourdieu.

Findings

The authors find, in contrast to both conventional wisdom and assumptions in prior (mostly quantitative) literature, that the primary value of sell-side analyst work lies not in the recommendations that analysts ultimately produce, but in the rich contextual information that they provide to buy-side analysts. In order to successfully provide this information, analysts have to embody large amounts of technical capital into their habitus.

Research limitations/implications

Much research in this area erroneously presumes that forecasting is the primary function of analysts. Analyst work needs to be understood as multifarious and requiring a well-developed habitus that is attuned to the accumulation of both technical and social capital. Future qualitative research might usefully explore in more detail the way in which corporate managers interact with analysts. The present study solicits the viewpoints only of the analysts themselves. The organisational context of the analysts was not explored in detail and the interviews were pre-crisis, which possibly explains why the technical capital of sell-side analysts was extolled by interviewees rather than lambasted.

Originality/value

The paper is one of few studies to look at analysts from a qualitative and sociological perspective. It both complements and extends both emerging sociological work on financial intermediaries and qualitative work on the “market for information”.

Details

Accounting, Auditing & Accountability Journal, vol. 29 no. 2
Type: Research Article
ISSN: 0951-3574

Keywords

Article
Publication date: 3 February 2022

Emre Tarim

This paper aims to explore how sell-side analysts and salespeople make sense of uncertainty on their market knowledge, valuation and marketing outputs.

Abstract

Purpose

This paper aims to explore how sell-side analysts and salespeople make sense of uncertainty on their market knowledge, valuation and marketing outputs.

Design/methodology/approach

Data is collected by direct observations of and interviews with analysts and salespeople in the Turkish stock exchange, an emerging market with considerable global fund management activity.

Findings

Analysts face considerable uncertainty on their market value forecasts but dismiss it as local dynamics not incorporable to valuation practices in global sell-side business. Salespeople, despite paying more attention to such dynamics owing to their sales tasks, limit themselves to analyst output in marketing. Both actors recognise the importance of analyst work to be able to have “a right to speak” in global sell-side business.

Research limitations/implications

Changing market conditions and regulations since the time of study have been shaping analysts and salespeople work in global sell-side business, for example, the way sell-side is compensated by buy-side, buy-side’s move to receiving sell-side services from fewer brokers and hence shrinking sell-side teams. The paper does not address these. Nonetheless, it shows how valuation and marketing can be two distinct lines of work in sell-side business irrespective of market conditions and raises the question for future research as to how sell-side professionals manage this distinction, and how they make sense of and cope with broad market dynamics beyond sell-side and buy-side relations (e.g. automated trading machines, online retail trading).

Originality/value

The paper provides rare observation-based insights into analyst and salespeople work, including their sensemaking of uncertainty. It shows the importance of market identities and associated knowledge in valuation and marketing work in sell-side business.

Details

Qualitative Research in Financial Markets, vol. 14 no. 4
Type: Research Article
ISSN: 1755-4179

Keywords

Article
Publication date: 12 February 2019

Souhir Khemir

The purpose of this paper is to explore the perception of environmental, social and governance (ESG) criteria by mainstream investors in an emerging financial market, that of…

1435

Abstract

Purpose

The purpose of this paper is to explore the perception of environmental, social and governance (ESG) criteria by mainstream investors in an emerging financial market, that of Tunisia, country at the origin of the Arab Spring.

Design/methodology/approach

A series of focus groups and semi-structured interviews were conducted with financial professionals.

Findings

Despite efforts by the Tunisian state to promote CSR and ESG criteria since the outbreak of the revolution of January 14th, 2011, the results show that these criteria are fairly well known by our interlocutors. As part of an investment allocation decision, the ESG criteria are considered as secondary to financial ones. The three criteria are classified as follows according to their usefulness in the investment choices of financial professionals: corporate governance, social and environmental.

Research limitations/implications

In addition to the subjective nature of the data collected, this research is limited to the input of only financial professionals. It does not inform us about ESG indicators that may influence the investment decisions of financial professionals, and thus this issue deserves further reflection.

Originality/value

This exploratory study sheds light on a little-explored topic in Tunisia, country at the origin of the Arab Spring. It contributes to the existing literature in the areas of investor behavior toward ESG criteria and adds to the limited literature in the area of emerging countries.

Details

International Journal of Emerging Markets, vol. 14 no. 5
Type: Research Article
ISSN: 1746-8809

Keywords

Article
Publication date: 6 March 2017

Joanna Krasodomska and Charles H. Cho

The purpose of this study is to examine the usage of non-financial information related to corporate social responsibility (CSR) issues from the perspective of sell-side analysts

1959

Abstract

Purpose

The purpose of this study is to examine the usage of non-financial information related to corporate social responsibility (CSR) issues from the perspective of sell-side analysts (SSAs) and buy-side analysts (BSAs) employed in Poland-based financial institutions.

Design/methodology/approach

The authors conducted a survey among financial analysts with the use of the computer-assisted telephone interview (CATI) method and an online questionnaire. The adopted methods included purposeful, quota sampling and snowball sampling.

Findings

Results indicate that financial analysts make use of CSR disclosures very rarely and attribute little importance to such information. Despite the limited use of CSR information and negative assessments of its quality, respondents are in favor of making a more frequent use of CSR disclosures. Finally, except for an analyst’s attitude toward the “comparability in time” information characteristic, results do not indicate any significant differences between SSAs’ and BSAs’ responses.

Research limitations/implications

The limited number of questionnaires prevented the use of more sophisticated statistical methods and the formulation of conclusions that could apply to the entire population. In addition, although the adopted CATI method provides a number of advantages, it also has its limitations – interviews had limited time and the questions along with the answers had to take into account the respondents’ limited perception ability.

Practical implications

The results of this study suggest that CSR disclosures have limited usage for financial analysts, at least in the Polish context. Further, not only do respondents rarely make use of CSR disclosures but they also give low assessments to their quality. This implies that the concept of CSR remains relatively far from becoming a priority; hence, some measures and incentives may be necessary.

Originality/value

The paper adds to a relatively small number of studies that have dealt with the issue of non-financial information and its usefulness for SSAs and BSAs in Central and Eastern Europe.

Details

Sustainability Accounting, Management and Policy Journal, vol. 8 no. 1
Type: Research Article
ISSN: 2040-8021

Keywords

Article
Publication date: 17 April 2009

Subhash Abhayawansa and Indra Abeysekera

Research on the use/disclosure of intellectual capital (IC) information by sell‐side analysts, using content analysis of their reports, is growing. This paper aims to establish…

1619

Abstract

Purpose

Research on the use/disclosure of intellectual capital (IC) information by sell‐side analysts, using content analysis of their reports, is growing. This paper aims to establish the importance of this perspective in understanding the role of IC in communicating firm value, to introduce possible theoretical frameworks to interpret the findings of such studies, and to propose methodological developments.

Design/methodology/approach

The paper argues for the need to look at IC from the perspective of sell‐side analysts, and then advocates the use of several theoretical frameworks to enrich current understanding of the role of IC as it is used/disclosed by sell‐side analysts. Current methodologies used in this type of research are critiqued with a view to proposing multiple research methods.

Findings

Looking at IC from the sell‐side analyst perspective helps us to understand how the capital market appreciates this information. However, IC information that analysts disclose cannot be taken at its face value. Issues of signalling, analysts' incentives/influences, political economy view and globalisation are introduced as providing theoretical frameworks for explaining IC disclosure in sell‐side analysts' reports. To obtain a richer picture of the role of IC information in analysts' decision processes, multiple research methods are proposed.

Practical implications

The proposals in this paper may inform and guide future research on IC information use/disclosure by sell‐side analysts with theoretical underpinnings and methodological rigour.

Originality/value

This paper is the first attempt to propose possible theories for interpreting findings of studies on IC use/discsloure by sell‐side analysts and suggest multiple research methodologies in this type of research.

Details

Journal of Intellectual Capital, vol. 10 no. 2
Type: Research Article
ISSN: 1469-1930

Keywords

Article
Publication date: 23 January 2007

Roland Burgman and Göran Roos

This paper has two purposes: to identify and explain the major forces that are causing the increasing need for operational reporting and intellectual capital (IC) reporting for…

8896

Abstract

Purpose

This paper has two purposes: to identify and explain the major forces that are causing the increasing need for operational reporting and intellectual capital (IC) reporting for European companies; and to identify the necessary and sufficient conditions for operational and intellectual capital reporting if such reporting is to be meaningful for information users.

Design/methodology/approach

The approach for this paper has been to examine relevant papers, reports, guidelines, compendiums, annual reports, opinions, submissions and legislation.

Findings

Eight determining forces are identified that make the basis of the case for the provision of operating and IC information: the long‐standing global dominance and growth of the US economy; the emergence of business models other than the value chain (especially the emergence of network businesses); the changing nature of stock exchanges; the influence of different investment fund types (mutual, pension and hedge funds); the roles of buy‐side and sell‐side analysts; global and European investment index development; rating agency activity; and financial reporting and corporate governance regime development.

Practical implications

The eight forces are interdependent and immutable. Comprehensive operational and IC reporting are unavoidable. Accordingly, the authors propose that the necessary and sufficient conditions for adequate enterprise information reporting are: a legal requirement for mandatory operational and IC reporting and attendant regulatory framework(s) where the legal framework is based on the concept of neglect; key operating and IC resource status and activity performance definitions and metrics that reflect the enterprise's underlying business model(s); and (3) a mapping of the capitalized operational and IC investments that are by definition normally expensed to the financial report accounts.

Originality/value

The authors believe that no one has previously formally proposed a mandatory operational and IC reporting requirement; a legal reference frame of reference based on the legal concept of neglect; standard definitions for operational and IC performance metrics; a reference framework for information quality that is, inter alia, based on the consistency, comparability and comprehensiveness of reported metrics; and the requirement to map all capitalized IC resources back to the financial reports of the company.

Details

Journal of Intellectual Capital, vol. 8 no. 1
Type: Research Article
ISSN: 1469-1930

Keywords

Article
Publication date: 7 September 2010

Subhash Abhayawansa and James Guthrie

The purpose of this paper is to review and synthesise current knowledge on the importance of intellectual capital (IC) information to the capital market.

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Abstract

Purpose

The purpose of this paper is to review and synthesise current knowledge on the importance of intellectual capital (IC) information to the capital market.

Design/methodology/approach

The paper is by way of literature review. It reviews the empirical research literature from different methodological strands and synthesises the findings to provide evidence on the impact/importance/usefulness of IC from a capital markets perspective.

Findings

Importance of IC information has been examined using various research methods including capital markets research, questionnaire surveys, face‐to‐face interviews, experimentations, verbal protocol analysis and content analysis of analyst reports. These studies provide evidence on the usefulness/importance of many types of IC information. Also, evidence from IC disclosure studies on initial public offering prospectuses sheds light on perceived importance of types of IC information to the capital market. However, there is a scope for more research to refine the current understanding of the importance of IC to the capital market.

Practical implications

By reviewing and synthesising the literature, this paper provides an important source of reference for future researchers and policy makers who wish to formulate guidelines for IC reporting to better meet the information needs of capital market actors. It also highlights future research directions.

Originality/value

This is the first‐published literature review on the importance of IC that provides a comprehensive review of studies adopting various research methods. Prior reviews have been limited to value‐relevance and/or predictive ability studies.

Details

Journal of Human Resource Costing & Accounting, vol. 14 no. 3
Type: Research Article
ISSN: 1401-338X

Keywords

Article
Publication date: 1 July 2005

Alex Proimos

To show how conflicts of interest and disingenuous investment research at the end of the 1990s stock market bubble occurred in Australia as well as the USA and Western Europe.

696

Abstract

Purpose

To show how conflicts of interest and disingenuous investment research at the end of the 1990s stock market bubble occurred in Australia as well as the USA and Western Europe.

Design/methodology/approach

Reviews the role of research analysts in major securities firms and conflicts of interest such as analyzing and evaluating a company for investment purposes, while seeking the investment banking business of the same company. Provides a case study of how an investment banking firm dealt with a provider of internet search services in both a research and an investment banking capacity. Investigates and evaluates the regulations and guidelines developed and introduced by the Australian regulatory bodies (Australian Stock Exchange (ASX) and Australian Securities and Investment Commission (ASIC)) and the Australian Government to deal with potential conflicts of interest that could affect the objectivity and independence of analyst research.

Findings

There were examples of conflicts of interest and fraudulent stock recommendations in Australia that rivaled the worst examples in the USA and Western Europe.

Originality/value

A reminder of fraudulent investment research practices during the stock market bubble and the potential for conflicts of interest between research and investment banking functions within the same firm.

Details

Journal of Investment Compliance, vol. 6 no. 3
Type: Research Article
ISSN: 1528-5812

Keywords

Article
Publication date: 1 October 2006

Per Flöstrand

The objective of this paper is to examine the use of indicators of intellectual capital (IC) by financial analysts employed by brokerage firms, so‐called “sell‐side analysts”, and…

1999

Abstract

Purpose

The objective of this paper is to examine the use of indicators of intellectual capital (IC) by financial analysts employed by brokerage firms, so‐called “sell‐side analysts”, and based on the findings draw conclusions on the perceived usefulness of different categories of indicators.

Design/methodology/approach

The basis for the paper is a content analysis of 250 sell‐side financial analyst reports written on a respective number of randomly selected S&P 500 companies. The study describes the use of IC information as leading indicators of future performance and identifies the contextual factors related to the use of such indicators.

Findings

The results reveal frequent use of IC indicators in analyst reports. Statistical analysis of the results indicates industry to be a contextual factor that is significantly related to the number of indicators used. Moreover, a majority of the IC indicators refer to relational capital, whereas indicators on human and structural capital are less frequent.

Originality/value

Information on the use of IC indicators is relevant to companies in their information disclosure process. Furthermore, understanding the behavior of users of financial information facilitates the work of standard setters.

Details

Journal of Intellectual Capital, vol. 7 no. 4
Type: Research Article
ISSN: 1469-1930

Keywords

Article
Publication date: 16 May 2023

Barry Hettler, Justyna Skomra and Arno Forst

Motivated by significant global developments affecting the sell-side industry, in particular a shift toward passive investments and growing regulation, this study examines whether…

Abstract

Purpose

Motivated by significant global developments affecting the sell-side industry, in particular a shift toward passive investments and growing regulation, this study examines whether financial analyst coverage declined over the past decade and if any loss of analyst coverage is associated with a change in forecast accuracy.

Design/methodology/approach

After investigating, and confirming, a general decline in analyst following, the authors calculate the loss of analyst coverage relative to the firm-specific maximum between 2009 and 2013. In multivariate analyses, the authors then examine whether this loss of coverage differs across geographic region, firm size and capital market development, and whether it is associated with consensus analyst accuracy.

Findings

Results indicate that between 2011 and 2021, firm-specific analyst coverage globally declined 17.8%, while the decline in the EU was an even greater, 28.5%. Within the EU, results are most pronounced for small-cap firms. As a consequence of the loss of coverage, the authors observe a global decline in forecast accuracy, with EU small-cap firms and firms domiciled in EU non-developed capital markets faring the worst.

Originality/value

This study is the first to document a concerning global decline in analyst coverage over the past decade. The study results provide broad-based empirical support for anecdotal reports that smaller firms in the EU and those in EU non-developed capital markets bear the brunt of consequences stemming from changes in the sell-side analyst industry.

Details

Accounting Research Journal, vol. 36 no. 2/3
Type: Research Article
ISSN: 1030-9616

Keywords

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