Search results
1 – 10 of 313Ameen Qasem, Norhani Aripin and Wan Nordin Wan-Hussin
The purpose of this paper is to examine the influence of financial restatements on the sell-side analysts' stock recommendations.
Abstract
Purpose
The purpose of this paper is to examine the influence of financial restatements on the sell-side analysts' stock recommendations.
Design/methodology/approach
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.
Findings
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.
Practical implications
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.
Originality/value
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.
Details
Keywords
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…
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
Keywords
The purpose of this paper is to increase the transparency of the value‐creation chain in the stock market. It aims to: conceptualize the value‐added through the relational…
Abstract
Purpose
The purpose of this paper is to increase the transparency of the value‐creation chain in the stock market. It aims to: conceptualize the value‐added through the relational capital, inductively develop models on how values are created, and discuss the values created for the analyst firm, the clients and investors in the stock market in general.
Design/methodology/approach
The paper is based on a case study of sell‐side analysts at a big Swedish investment bank and their work with real life situations of changes in recommendations.
Findings
The findings of the case study indicate that analysts, through their relational capital, access competitive advantages needed for remaining on a highly competitive market. They get access to value‐added information and knowledge and also business for the firm. This helps them to fulfill the three roles played, i.e. as information intermediaries, knowledge builders and businessmen. However, the analysts' dependencies, due to their relational capital and the analysts' conflicting roles, result in ambiguous or even biased information. The values added to clients differ between prioritized clients who receive value‐added information through the relational capital with the analysts and non‐prioritized clients with limited, or no access, to the analysts' services.
Originality/value
Value created through relational capital within organizations has been intensively studied within the area of intellectual capital. However, the sell‐side analysts' value‐creation chain linked to their relational capital with company representatives and clients, considered in the present study, has been neglected.
Details
Keywords
Ameen Qasem, Wan Nordin Wan-Hussin, Belal Ali Abdulraheem Ghaleb and Hasan Mohamad Bamahros
The purpose of this study is to investigate the interplay between institutional investors' ownership (IIO), politically connected firms (POC) and sell-side analysts' stock…
Abstract
Purpose
The purpose of this study is to investigate the interplay between institutional investors' ownership (IIO), politically connected firms (POC) and sell-side analysts' stock recommendations (ASR).
Design/methodology/approach
This study employs ordinary least square (OLS) regression to test the hypotheses. The sample comprises 280 Malaysian public listed companies (PLC) and encompasses the 2008–2013 time frame (a total of 735 observations).
Findings
The results show a significant and positive link between IIO and ASR. In addition, a negative association is found between POC and ASR. Moreover, the POC weakens the positive relationship between the IIO and ASR.
Research limitations/implications
One important implication of this study is that political involvement in corporate decisions is a prominent characteristic of the Malaysian market, which can significantly affect the information environment and analysts' reactions.
Practical implications
The findings of this study provide useful empirical guidance to the regulators in evaluating the efficacy of recent regulatory initiatives. Investors may also gain useful insights from this study, specifically in recognising the crucial monitoring role played by institutional investors and how politically patronised firms are viewed unfavourably by equity analysts.
Originality/value
This study is one of the first to examine the joint influence of IIO and POC, on ASR.
Details
Keywords
Subhash Abhayawansa and James Guthrie
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…
Abstract
Purpose
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.
Design/methodology/approach
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.
Findings
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.
Practical implications
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.
Originality/value
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.
Details
Keywords
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…
Abstract
Purpose
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.
Design/methodology/approach
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.
Findings
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.
Originality/value
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.
Details
Keywords
Catherine A. Finger and Wayne R. Landsman
This paper provides evidence that will help stock market participants interpret sell‐side analyst buy/sell recommendations. We examine whether recommendation levels (e.g. buy…
Abstract
This paper provides evidence that will help stock market participants interpret sell‐side analyst buy/sell recommendations. We examine whether recommendation levels (e.g. buy) correspond with traditional predictors of the underlying stock's performance, and whether recommendation revisions (e.g. an upgrade) are consistent with news analysts receive. Consistent with theory, we find that more optimistic recommendations are associated with higher mean forecast errors, forecast revisions, and forecasted earnings‐to‐price ratios. However, contrary to expectations, they also have higher market‐to‐book ratios, higher market values, and lower ratios of value to price (Lee et al. 1999). These results are probably driven by specific differences between buys and the less optimistic recommendations, as holds and sells are rarely distinguishable from each other. Our recommendation revision findings are consistent with our expectations. Upgrades have significantly larger earnings forecast errors, earnings forecast revisions, and unexpected earnings growth than do reiterations or downgrades.
Details
Keywords
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.
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
Keywords
Myungsun Kim, Robert Kim, Onook Oh and H. Raghav Rao
The purpose of this paper is to examine the role of online freelance stock analysts in correcting mispricing of hard-to-value firms during sentiment-driven market periods.
Abstract
Purpose
The purpose of this paper is to examine the role of online freelance stock analysts in correcting mispricing of hard-to-value firms during sentiment-driven market periods.
Design/methodology/approach
The sample covers 23,758 Seeking Alpha articles obtained for the period between January 2005 and September 2011. The authors use OLS regressions to test the stock market reaction around Seeking Alpha analysts’ reports. The information in online analysts’ reports is measured by the tone of stock articles posted in SeekingAlpha.com (SA).
Findings
The analysis reveals that the degree of negative tone of their stock articles is related to three-day stock returns around the article posting dates. It further reveals that the relation between these returns and prevailing market sentiment depends on firm-specific susceptibility to the market sentiment. The three-day stock returns are higher during low market sentiment periods for firms that are more susceptible to the market sentiment, hence, harder to value. The tone of the stock articles during low sentiment periods also predicts the news in the forthcoming earnings.
Practical implications
The findings help stock investors identify value-relevant information provided by online freelance stock analysts, particularly for hard-to-value stocks and during the low market sentiment period.
Originality/value
This study utilizes a unique dataset obtained from SA. This is the first paper to examine whether online analysts help investors correct potential undervaluation of hard-to-value firms during the low market sentiment period.
Details
Keywords
Subhash Abhayawansa and James Guthrie
This paper aims to understand the potential usefulness of sell-side analysts’ investment recommendation reports as a medium for communicating intellectual capital (IC…
Abstract
Purpose
This paper aims to understand the potential usefulness of sell-side analysts’ investment recommendation reports as a medium for communicating intellectual capital (IC) information. It explores the manner in which analyst reports supply IC information and the types of companies in relation to which analyst reports supply most IC information.
Design/methodology/approach
A content analysis of 64 initiating coverage analyst reports written on Australian companies is performed. The content analysis focuses on three semantic properties of IC disclosures: format (i.e. discursive, numerical-non-monetary, numerical-monetary and visual), news-tenor (i.e. positive, neutral and negative) and time-orientation (i.e. forward-looking, non-time-specific and past-oriented). The paper investigates whether analyst reports contain more IC information on companies providing less IC information through their own channels. For this, the authors test the hypothesised relationship between the extent of IC information and the IC intensity of the analysed company’s sector and the systematic risk of the company.
Findings
IC information in analyst reports is more discursive than numerical, not significantly more forward-looking in general and balanced between negative or neutral and positive attributions (except for information on company management). However, compared to the semantic properties of corporate reporting media, analyst reports in this study communicate IC information in a manner arguably more useful to investors. A company’s systematic risk and sector in which the company operates are associated with the extent of IC information in analyst reports. The findings indicate that analysts’ contribution as an IC information provider is greatest for companies providing less IC information directly to the public.
Practical implications
The results have implications for policymakers contemplating reforming non-financial reporting regulation and ensuring a level playing field for investors and companies when determining corporate IC disclosure strategy and strategies for investor relations.
Originality/value
This is the first study to explore semantic properties and drivers of IC information in analysts’ initiating coverage reports. This paper highlights the importance of analyst reports as a medium for communicating IC information that could complement corporate communication media.
Details