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Security Analysis, Agency Costs, and UK Firm Characteristics

  • Doukas, John A.

    (Stern School of Business)

  • Phillip J. McKnight

    (Cardiff Business School)

  • Christos Pantzalis

    (University of South Florida)

This paper assesses the monitoring power of security analysts from the manager-shareholder conflict perspective. Using a sample of UK firms tracked by security analysts, our evidence supports the view that security analysis acts as a monitoring mechanism in reducing agency costs. We also find that security analysts are more effective in reducing agency costs for smaller and more focused firms rather than larger and more diversified firms suggesting that for larger and more complex firms security analysis is less effective. The UK findings suggest that the monitoring role of security analysts is not restricted to the U.S. capital market environment.

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Paper provided by Royal Economic Society in its series Royal Economic Society Annual Conference 2002 with number 65.

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Date of creation: 29 Aug 2002
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Handle: RePEc:ecj:ac2002:65
Contact details of provider: Postal: Office of the Secretary-General, School of Economics and Finance, University of St. Andrews, St. Andrews, Fife, KY16 9AL, UK
Phone: +44 1334 462479
Web page: http://www.res.org.uk/society/annualconf.asp
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