Fool's gold: Social proof in the initiation and abandonment of coverage by Wall Street analysts

• 成果类型: Article
• 署名作者: Rao, H; Greve, HR; Davis, GF
• 署名单位: Emory University; BI Norwegian Business School; University of Michigan System; University of Michigan
• 刊物名称: ADMINISTRATIVE SCIENCE QUARTERLY
• ISSN/ISSBN: 0001-8392
• DOI: 10.2307/3094873
• 发表日期: 2001
• 页码: 502-526
• 关键词: INTERORGANIZATIONAL NETWORKS; Informational cascades; FORECAST ACCURACY; SECURITY ANALYSTS; decision-making; winners curse; diffusion; uncertainty; BEHAVIOR; regret

摘要

This paper examines the dynamics of social influence in the choices of securities analysts to initiate and abandon coverage of firms listed on the NASDAQ national market. We show that social proof-using the actions of others to infer the value of a course of action-creates information cascades in which decision makers initiate coverage of a firm when peers have recently begun coverage. Analysts that initiate coverage of a firm in the wake of a cascade are particularly prone to overestimating the firm's future profitability, however, and they are subsequently more likely than other analysts to abandon coverage of the firm. We thus find evidence for a cycle of imitation-driven choice followed by disappointment and abandonment. Our account suggests that institutionalization rooted in imitation is likely to be fragile.(.)