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We study whether financial analysts' concern for preserving good relationships with firms' managers motivates them to issue pessimistic or optimistic forecasts. Based on a dataset of one-yearahead EPS forecasts issued by 4 648 analysts concerning 241 French firms (1997-2007), we regress the analysts' forecast accuracy on its unintentional determinants. We then decompose the fixed effect of the regression and we use the firm-analyst pair effect as a measure of the intensity of the firm-analyst relationship. We find that a low (high) firm-analyst pair effect is associated with a low (high) forecast error. This observation suggests that pessimism and optimism result from the analysts' concern for cultivating their relationship with the firm's management

Author

Listed:
  • Anne-Gael Vaubourg
  • Valdete Berisha-Krasniqui

    (Larefi, Université Bordeaux IV)

  • Sébastien Galanti

    (LEO, Université d'Orléans)

  • Christophe Hurlin

    (LEO, Université d'Orléans)

  • Régis Breton

    (Centre de recherche de la Banque de France)

Abstract

No abstract is available for this item.

Suggested Citation

  • Anne-Gael Vaubourg & Valdete Berisha-Krasniqui & Sébastien Galanti & Christophe Hurlin & Régis Breton, 2013. "We study whether financial analysts' concern for preserving good relationships with firms' managers motivates them to issue pessimistic or optimistic forecasts. Based on a dataset of one-yearahead EPS," Larefi Working Papers 1304, Larefi, Université Bordeaux 4.
    • Handle: RePEc:laf:wpaper:cr1304
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    References listed on IDEAS

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    More about this item

    Keywords

    financial analysts; earnings forecasts; soft information; panel regression;
    All these keywords.

    JEL classification:

    • C59 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Other
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage

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