.png){kind=icon}
.png){kind=icon}
Return
COMPETITION AND BIAS
.png){kind=icon}
PRE
AI
DOI：10.1162/qjec.2010.125.4.1683.png)
.png){kind=icon}
Original request for help.png){kind=icon}
Share.png){kind=icon}
Save
Abstract
En 中文
We attempt to measure the effect of competition on bias in the context of analyst earnings forecasts, which are known to be excessively optimistic because of conflicts of interest. Our natural experiment for competition is mergers of brokerage houses, which result in the firing of analysts because of redundancy (e.g., one of the two oil stock analysts is let go) and other reasons such as culture clash. We use this decrease in analyst coverage for stocks covered by both merging houses before the merger (the treatment sample) to measure the causal effect of competition on bias. We find that the treatment sample simultaneously experiences a decrease in analyst coverage and an increase in optimism bias the year after the merger relative to a control group of stocks, consistent with competition reducing bias. The implied economic effect from our natural experiment is significantly larger than estimates from OLS regressions that do not correct for the endogeneity of coverage. This effect is much more significant for stocks with little initial analyst coverage or competition.
Keywords:
ANALYSTS EARNINGS FORECASTS
SELECTION
MARKET
AI Summary
Key information extracted from the uploaded paper, including a brief overview, abstract, background, key highlights, visual analysis, and future outlook.
Journal
IF:
12.7
Papers:
1.2K
Citations:
4.1W