This paper provides a comprehensive exploration of the types of accounting fraud committed by firms over the period 1995-2009. Using detailed data from US SEC Accounting and Auditing Enforcement Releases (AAER), we examine the likelihood and timing of analyst coverage decisions and recommendation revisions related to fraud firms versus firms without accounting fraud. We find that analysts have a higher probability of taking the more severe action of dropping coverage rather than only revising down recommendations for firms with any type of accounting fraud and also for specific egregious types of accounting fraud. Through the use of competing hazards models, we also find that accounting frauds and their egregiousness are positively (negatively) associated with the timeliness of the analysts’ action to drop coverage (revise only). Overall, we find that analysts’ actions may be useful in determining the occurrence of accounting fraud prior to the public announcement of the fraud.

An Analysis of Accounting Frauds and the Timing of Analyst Coverage Decisions and Recommendation Revisions: Evidence from the US

Investor attention factors and stock returns: Evidence from China

This study investigates the relation between managerial overconfidence and analyst recommendations. The empirical finding shows that analysts are less likely to issue upgrade recommendations for firms managed by overconfident CEOs. Similarly, analysts spend a longer time to upgrade stocks associated with overconfident CEOs. The effect of CEO overconfidence on recommendation revisions is non-monotonic. Analysts are more reluctant to upgrade firms with highly-overconfident CEOs. More experienced analysts are less susceptible to managerial overconfidence. Moreover, investors exhibit stronger response to recommendations for firms with overconfident CEOs.

Effects of managerial overconfidence on analyst recommendations

The paper models and verifies the spread and decay of investor’s attention before listing on the stock market by using the Baidu Index as a proxy for investor attention of the frequency of searches...

Individual investor’s limited attention and IPO performance

Investment and access to external finance in Europe: Does analyst coverage matter?

Investor attention and information diffusion from analyst coverage

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Investor attention and information diffusion from analyst coverage