Do Analyst Stock Recommendations Piggyback on Recent Corporate News? An Analysis of Regular-Hour and After-Hours Revisions

• 成果类型: Article
• 署名作者: Li, Edward Xuejun; Ramesh, K.; Shen, Min; Wu, Joanna Shuang
• 署名单位: City University of New York (CUNY) System; Baruch College (CUNY); Rice University; University of Rochester
• 刊物名称: JOURNAL OF ACCOUNTING RESEARCH
• ISSN/ISSBN: 0021-8456
• DOI: 10.1111/1475-679X.12083
• 发表日期: 2015
• 页码: 821-861
• 关键词: EARNINGS FORECASTS; Price discovery

摘要

Analysts often update their recommendations following corporate news. Questions have been raised regarding analysts' ability to generate new information beyond recent corporate events. Employing a comprehensive database on corporate news, we show that only a small minority, or 27.9%, of all recommendation revisions directionally confirm the information in the preceding corporate events and even these confirming revisions facilitate the information discovery of corporate events and thus cannot simply be dismissed as piggybacking. Our analysis further shows that analysts not only facilitate price discovery to corporate news through issuing trending revisions but also help reverse prevailing market sentiments following corporate news by issuing contrarian revisions. Our study is the first to investigate short-window intraday market reactions to revisions issued after hours, which account for 70% of all recommendation revisions in our sample period. Analysts' incentives to issue revisions after hours appear to reflect demands from large institutional clients, who dominate after-hours trading. More importantly, we show that the after-hours revisions are associated with significantly greater price reactions and different price reaction patterns than revisions issued during regular trading hours. Collectively, our evidence indicates that analysts are a significant source of new information beyond recent corporate news and they also help shape the market's assessment of corporate disclosures.