Wall Street and Product Quality: The Duality of Analysts

• 成果类型: Article
• 署名作者: Li, Yinghua; Lin, Yupeng; Wang, Xiaoqiao; Yang, Shijie
• 署名单位: Arizona State University; Arizona State University-Tempe; National University of Singapore; The Chinese University of Hong Kong, Shenzhen; Southern University of Science & Technology
• 刊物名称: ACCOUNTING REVIEW
• ISSN/ISSBN: 0001-4826
• DOI: 10.2308/TAR-2022-0218
• 发表日期: 2024
• 页码: 387-420
• 关键词: ASYMMETRIC-INFORMATION; CORPORATE DISCLOSURE; earnings management; exogenous changes; capital-markets; coverage; IMPACT; firm; recommendations; INNOVATION

摘要

We investigate the role of financial analysts in product quality failures. Relying on information about product recalls, we first show that analyst coverage on average reduces product quality, particularly when managers face greater short-term pressure from institutional investors. However, after identifying a subgroup of analysts who raise questions on product-related issues in earnings conference calls, we find that coverage by these product analysts enhances rather than compromises product quality. Firms with greater product analyst coverage are also more likely to retire low-quality products. Additional analysis demonstrates that product analysts help safeguard product quality by further probing into product-related matters and issuing more timely recommendation downgrades after firms announce product deficiencies.