Accounting and Finance Seminar - Jay Jung (Cass Business School)

24 February 2020, 1.00 PM - 24 February 2020, 2.15 PM

Jay Jung

G.15, 15-19 Tyndalls Park Road

Title: Analysts’ Cultural Attitudes to Time Orientation

Abstract:

We study how analysts’ cultural attitudes affect their effort allocation to  the production and quality of their long-term  earnings  forecasts,  their stock recommendation  profitability,  and  managerial  myopia for the firms they cover. We find that analysts from ethnic groups that have a long-term oriented culture produce more long-term earnings forecasts, issue more timely long-term forecasts and  more  profitable stock  recommendations.  This  positive  association  is  more  pronounced  for  firms with more long-term investments, for smaller firms, and during periods of higher economic uncertainty. Using quasi-natural experiments of brokerage houses’ mergers and closures, we find a  positive  and plausibly  causal  effect  of  the  coverage  by  long-term  oriented  analysts  on  firm  innovation.  Our  paper  identifies  an  important  determinant  of  analysts’  production  of  long-term earnings forecasts and also shows that, contrary to extant research finding that analysts’ coverage fosters  managerial  myopia,  the  coverage  of  long-term  oriented  analysts  ameliorates  managerial myopia.

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