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Political contributions and analyst behavior

Danling Jiang1; Alok Kumar2; Kelvin Law3

1 Florida State University · 2 University of Miami · 3 Tilburg University

Review of Accounting Studies 2016 open access

We show that the personal traits of analysts, as revealed by their political donations, influence their forecasting behavior and stock prices. Analysts who contribute primarily to the Republican Party adopt a more conservative forecasting style. Their earnings forecast revisions are less likely to deviate from the forecasts of other analysts and are less likely to be bold. Their stock recommendations also contain more modest upgrades and downgrades. Overall, these analysts produce better quality research, which is recognized and rewarded by their employers, institutional investors, and the media. Stock market participants, however, do not fully recognize their superior ability as the market reaction following revisions by these analysts is weaker.

DOI
10.1007/s11142-015-9344-9
Volume
21 (1)
Pages
37-88
Language
en
Export
BibTeX
Sources
semanticscholar openalex crossref