An investigation of the impact of publicly available accounting data, other publicly available information and management guidance on buy-side analysts' stock investment recommendations.

摘要

Since there is little empirical evidence concerning the behavior of buy-side analysts, a questionnaire was designed, using the academic literature as a guide, to investigate the extent to which buy-side analysts' attitudes towards a firm and their stock investment recommendations are influenced by: (a) frequency and quality of information received from publicly available accounting data, (b) other available public information, (c) management guidance, (d) other analysts' opinions, and (e) their trust of management.;The survey also asks buy-side analysts a number of questions raised by the academic literature about their assessment of the representational faithfulness of publicly available accounting data, other publicly available information, and the guidance they receive from the management of a firm they are covering, as well as the degree of use/usefulness of the information they receive from publicly available accounting data, other publicly available information, management guidance, and information received from other financial analysts.;A survey, consisting of 135 usable responses, was evaluated using the Partial Least Squares methodology. Three main models (and a total of seven models, as will be discussed in the next paragraph) were then developed to test the data received from the survey. The results indicate that the measurement models developed were good predictors.;The first main model, the Stock Purchase Recommendation Model, which predicts the relationship between publicly available accounting data, other publicly available information, management guidance, trust of management and other analysts' opinions, and the buy-side analyst's stock purchase recommendation, had an R2 of .398 (and an Adjusted R2 of .371). It predicted that publicly available accounting data (.393 at the .000 level) and other analysts' opinions (.258 at the .002 level) were the most significant factors in the stock purchase recommendation.;This measurement model became an even better predictor (with an R 2 of .527 and an Adjusted R2 of .434) when the interaction effects (representational faithfulness and degree of usage) were added for each of the main effects. It also predicted that publicly available accounting data (.497 at the .000 level) and other analysts' opinions (.197 at the .040 level) were two of the most significant factors in the stock purchase recommendation and added a third---trust of management (.172 at the .097 level).;The Attitude Model, which predicts the relationship between publicly available accounting data, other publicly available information, management guidance, trust of management and other analysts' opinions, and the buy-side analyst's attitude towards a stock, had an R2 of .642 (and an Adjusted R2 of .626). It predicts that publicly available accounting data (.450 at the .000 level), other analysts' opinions (.195 at the .002 level) and trust of management (.383 at the .000 level) have the most influence on the buy-side analyst's attitude towards a stock.;The Full Model, which combines the two main effects models into one, is employed to predict the influence that attitude would have on a buy-side analyst's stock purchase recommendation (R2 of .565 with an Adjusted R2 of .541). This model predicts that buy-side analysts' attitude towards a stock was influenced (at the .000 level) by publicly available accounting data (.450 at the .000 level), trust of management (.383 at the .000 level) and the opinions of other financial analysts (.195 at the .002 level), with an R2 of .639.;The Full Model further predicts that the stock purchase recommendation made by buy-side analysts is positively influenced by his or her attitude towards a stock (.684 at the .000 level) and the opinions of other analysts (.124 at the .091 level), and negatively influenced by their trust of management (-.179 at the .030 level).;Interestingly enough, this last finding involving buy-side analysts' trust of management is one of the more interesting findings. It implies that buy-side analysts' trust of management is a "double edged sword" and that while honest management has a positive effect on the attitude a buy-side analyst has towards a company, buy-side analysts seem to question if this honesty will affect management's willingness to take risks or make tough decisions ("nice guys finish last" syndrome).;Finally, we find support for our hypotheses that: (1) a buy-side analyst's stock purchase recommendation and his/her attitude towards a firm are influenced by both publicly available accounting data, other analysts' opinions and trust of management; (2) buy-side analysts find publicly available accounting data to be useful in making their stock purchase recommendation; and, (3) a buy-side analyst's attitude towards a firm greatly influences his or her stock purchase recommendation.