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The role of financial analysts in the strategy formation process of business firms

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  • Dodo zu Knyphausen-Aufseß
  • Michael Mirow
  • Lars Schweizer

Abstract

Increasingly, financial analysts are influencing the strategy formation process of corporations, but so far little attention has been paid to the complex processes of interaction and the corresponding strategic outcomes. This article discusses these influences through different theoretical lenses (strategic management, finance and accounting theory and economic sociology, institutional and systems theory). Based on case study evidence from three companies, we describe how the interactions between financial analysts and business firms take place, and formulate several propositions on the relationship between financial analysts and business firms as well as on its influence on the strategic outcome of business firms. The results suggest that the influence of financial analysts is indeed significant but depends on a number of contextual factors, such as the financial situation of the company or the need for capital. Practicing managers can learn how to handle a turbulent environment such as the financial analyst community and how they can change their planning processes to absorb as much information as possible. Copyright 2011 The Author 2011. Published by Oxford University Press on behalf of Associazione ICC. All rights reserved., Oxford University Press.

Suggested Citation

  • Dodo zu Knyphausen-Aufseß & Michael Mirow & Lars Schweizer, 2011. "The role of financial analysts in the strategy formation process of business firms," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 20(4), pages 1153-1187, August.
    • Handle: RePEc:oup:indcch:v:20:y:2011:i:4:p:1153-1187
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    File URL: http://hdl.handle.net/10.1093/icc/dtr033
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    Cited by:

    1. Mohammadi, Ali & Basir, Nada O. & Beyhaghi, Mehdi, 2015. "Research Intensity and Financial Analysts Earnings Forecast: Signaling Effects of Patents," Working Paper Series in Economics and Institutions of Innovation 397, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.
    2. Thomas Lagner & Dodozu Knyphausen‐Aufseß, 2012. "Rating Agencies as Gatekeepers to the Capital Market: Practical Implications of 40 Years of Research," Financial Markets, Institutions & Instruments, John Wiley & Sons, vol. 21(3), pages 157-202, August.
    3. Guanming He & Yun Sun & April Zhichao Li, 2024. "Does analysts’ industrial concentration affect the quality of their forecasts?," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 38(1), pages 37-91, March.

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