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Political contributions and analyst behavior

Author

Listed:
  • Danling Jiang

    (Florida State University)

  • Alok Kumar

    (University of Miami)

  • Kelvin K. F. Law

    (Tilburg University)

Abstract

We show that the personal traits of analysts, as revealed by their political donations, influence their forecasting behavior and stock prices. Analysts who contribute primarily to the Republican Party adopt a more conservative forecasting style. Their earnings forecast revisions are less likely to deviate from the forecasts of other analysts and are less likely to be bold. Their stock recommendations also contain more modest upgrades and downgrades. Overall, these analysts produce better quality research, which is recognized and rewarded by their employers, institutional investors, and the media. Stock market participants, however, do not fully recognize their superior ability as the market reaction following revisions by these analysts is weaker.

Suggested Citation

  • Danling Jiang & Alok Kumar & Kelvin K. F. Law, 2016. "Political contributions and analyst behavior," Review of Accounting Studies, Springer, vol. 21(1), pages 37-88, March.
    • Handle: RePEc:spr:reaccs:v:21:y:2016:i:1:d:10.1007_s11142-015-9344-9
    DOI: 10.1007/s11142-015-9344-9
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    More about this item

    Keywords

    Equity analysts; Political contribution; Conservative analysts; Forecasting style; Market reaction;
    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
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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