Analyst Herding, Shareholder Investment Horizon, and Management Earnings Guidance

This dissertation examines the characterization of transient investors by financial analysts. Transient investors have been portrayed in the literature as either 1) informed investors or 2) poor monitors. No research to date, however, has examined how financial analysts, who are important information intermediaries, characterize transient investors. A view of transient investors through the lens of a financial analyst is obtained through examining how the presence of transient owners in a firm affects financial analysts' decision making. Specifically, this study examines how transient ownership affects both the propensity of analysts to herd when issuing earnings forecasts for a given firm as well as the incidence with which analysts revise their forecasts when the firm issues earnings guidance. Empirical tests show that financial analysts exhibit a greater propensity to herd when there are transient investors present. The proposed reason for this effect is analysts are herding due to reputational concerns. Further testing, however, does not show that the relation between transient ownership and analyst herding is owed to poor monitoring behavior of transient-owned firms. In contrast, evidence is consistent with the hypothesis that the firm information environment of transient-owned firms is an important cause of analyst herding. In summary, evidence is consistent with the informed investor portrayal of transient investors and there is no evidence indicating financial analysts view transient owners as poor monitors. Finally, when the decision of analysts to issue revised forecasts is examined, it is found that having a higher percentage of the firm owned by dedicated or long-term investors increased the propensity of analysts to issue a revised forecast. Thus, while my analysis is inconsistent with a poor monitoring portrayal of transient investors, results suggest that a dedicated investor base can enhance the perceived credibility of firm disclosures.

Name thesis:degree_name

Ph. D.

Level thesis:degree_level

doctoral

Discipline thesis:degree_discipline

Accounting and Information Systems

Department dc:contributor.department

Accounting and Information Systems

Grantor dc:publisher

Virginia Tech

Year dc:date.issued

2012

Author dc:creator

• White, Todd Palmer

Chair dc:contributor.committeechair

• Maher, John J.

Committee members dc:contributor.committeemember

• Brown, Robert M.
• Barkhi, Reza
• Oler, Mitchell J.
• Ince, Ozgur S.

• Earnings Guidance
• Short-Term Horizon
• Transient Investors
• Herding
• Financial Analysts

Statement dc:rights

• In Copyright

Licence dc:rights.uri

• http://rightsstatements.org/vocab/InC/1.0/

Dc Identifier Other

etd-04132012-121410

OAI identifier oai:identifier

oai:vtechworks.lib.vt.edu:10919/37618