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The Influence of Corporate Governance Mechanisms on the Behavior of Financial Analysts of US Firms: An Empirical Analysis

In: International Corporate Governance and Regulation

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  • Ahmed Bouteska

Abstract

The aim of this paper is to analyze the impact of corporate governance (focused on some key mechanisms as board size, board independence, managerial ownership, institutional ownership, and chief executive officer duality) on financial analysts’ behavior in US. Results from panel data analysis for 294 US listed firms observed from 2007 to 2014 show that several attributes of the board of directors and audit committee have no effects on the number of analysts who are following the firm and the properties of analysts’ earnings forecasts. Findings also suggest that firms with independent and large boards and blockholders ownership benefit of more analyst following. In addition, it is proven that analysts’ earnings forecasts are optimistic and more accurate for companies where blockholder ownership, either by managers or external entities have larger quoted spreads but of lower quality for the ones which have greater independent board members and institutional investor’s holding.

Suggested Citation

  • Ahmed Bouteska, 2018. "The Influence of Corporate Governance Mechanisms on the Behavior of Financial Analysts of US Firms: An Empirical Analysis," Advances in Financial Economics, in: International Corporate Governance and Regulation, volume 20, pages 131-172, Emerald Group Publishing Limited.
    • Handle: RePEc:eme:afeczz:s1569-373220180000020006
    DOI: 10.1108/S1569-373220180000020006
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    More about this item

    Keywords

    Corporate governance; financial analysts; analyst following; analyst optimism; forecast accuracy; United States; G14; G24; G32; G38; M41;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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