Analysts' Conflict of Interest and Biases in Earnings Forecasts / Louis K. C. Chan, Jason Karceski, Josef Lakonishok.

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Chan, Louis K. C

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Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w9544.Publication details: Cambridge, Mass. National Bureau of Economic Research 2003.Description: 1 online resource: illustrations (black and white)Subject(s):

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Abstract: Analysts' earnings forecasts are influenced by their desire to win investment banking clients. We hypothesize that the equity bull market of the 1990s, along with the boom in investment banking business, exacerbated analysts' conflict of interest and their incentives to adjust strategically forecasts to avoid earnings disappointments. We document shifts in the distribution of earnings surprises, the market's response to surprises and forecast revisions, and in the predictability of non-negative surprises. Further confirmation is based on subsamples where conflicts of interest are more pronounced, including growth stocks and stocks with consecutive non-negative surprises; however shifts are less notable in international markets.

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Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w9544 (Browse shelf(Opens below))	Not For Loan

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March 2003.

Analysts' earnings forecasts are influenced by their desire to win investment banking clients. We hypothesize that the equity bull market of the 1990s, along with the boom in investment banking business, exacerbated analysts' conflict of interest and their incentives to adjust strategically forecasts to avoid earnings disappointments. We document shifts in the distribution of earnings surprises, the market's response to surprises and forecast revisions, and in the predictability of non-negative surprises. Further confirmation is based on subsamples where conflicts of interest are more pronounced, including growth stocks and stocks with consecutive non-negative surprises; however shifts are less notable in international markets.