Financial analyst coverage and corporate social performance: Evidence from natural experiments

• 成果类型: Article
• 署名作者: Qian, Cuili; Lu, Louise Y.; Yu, Yangxin
• 署名单位: University of Texas System; University of Texas Dallas; Australian National University; City University of Hong Kong
• 刊物名称: STRATEGIC MANAGEMENT JOURNAL
• ISSN/ISSBN: 0143-2095
• DOI: 10.1002/smj.3066
• 发表日期: 2019
• 页码: 2271-2286
• 关键词: CORPORATE SOCIAL PERFORMANCE; Financial analysts; Natural experiments; Stakeholders; TIME HORIZONS

摘要

Research summary This study examines the impact of financial analysts on a firm's corporate social performance (CSP). We integrate research on time horizons with stakeholder theory and argue that, in response to short-term pressure from financial analysts, firms and their managers become more short-term focused and limit investment in socially responsible activities. Using broker mergers and closures in the United States as exogenous shocks to analyst coverage and a difference-in-differences research design, we find that an exogenous decrease in analyst coverage leads to better CSP, establishing a causal relationship between analyst coverage and the level of a firm's CSP. The impact of financial analysts on a firm's CSP is exacerbated if the terminated analyst works for a larger brokerage house and has more general- and firm-specific experiences. Managerial summary This study looks at the relationship between financial analysts, a key stakeholder group of the capital market, and a firm's socially responsible activities. Using a sample of U.S. publicly listed firms during the period of 2001-2013, our study finds novel evidence that the pressure to meet earnings target set by financial analysts hinders a firm's socially responsible performance. In addition, this pressure is more salient for firms with analysts that work for large brokerage houses and have more experiences. This study provides new insights to corporate social responsibility research by evaluating the impact of financial analysts on firms' social engagement.