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The effect of managerial entrenchment on analyst bias

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  • Ulupinar, Bahar

Abstract

While analyst bias is well documented, its relationship with corporate governance has been neglected. We claim that entrenched management of covered firms significantly increases analyst bias. By using governance index as a proxy for managerial entrenchment, we show that analyst bias increases as managerial entrenchment increases and affiliated analysts do not provide biased research for firms with the least and most entrenched managers due to their reputational capital concerns. Furthermore, our results show that as the channels managers use to pressure analysts get clogged after the regulations that took place between 2000 and 2003, entrenched managers' effect on analyst behavior disappeared.

Suggested Citation

  • Ulupinar, Bahar, 2018. "The effect of managerial entrenchment on analyst bias," Global Finance Journal, Elsevier, vol. 37(C), pages 25-38.
    • Handle: RePEc:eee:glofin:v:37:y:2018:i:c:p:25-38
    DOI: 10.1016/j.gfj.2018.04.001
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    More about this item

    Keywords

    Corporate governance; Analyst Bias;

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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