Analyst following and institutional ownership

Article Abstract:

The decision by stock brokers' analysts to follow corporations and the decision by institutional investors to invest in those same corporations was researched. The two decisions are related through the vendor/client relationship maintained between brokers' analysts and institutional investors. Analysts function as conduits of market information to institutional investors, and institutional investors' investment decisions affect the choice of analysts on which firms to follow. A simultaneous statistical model was used to model the joint behavior of analysts and institutional investors to yield the determinants of their behavior. Research results reveals a link between prior analysts following of corporations and the decisions of institutional investors to hold the corporations' stock.

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Discussion of analyst following and institutional ownership

Article Abstract:

Patricia C. O'Brien and Ravi Bhushan's (1990) used a simultaneous statistical model to research the connection between the following of corporations stock by stockbrokers' analysts and the decision of institutional investors to hold stock in the corporations. O'Brien and Bhushan reveal a positive correlation between the two phenomena and stipulate that the link is the result of the vendor/client relationship between the stockbrokers' analysts and the institutional investors. O'Brien and Bhushan can replicate their analysis on a holdout sample, which underscored the validity of their research. The research shows the efficacy of using the simultaneous statistical equations model in accounting research.

O'Brien, Patricia C., Bhushan, Ravi

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Analyst impartiality and investment banking relationships

Article Abstract:

A study was conducted to examine whether investment banking ties influence the speed with which analysts convey unfavorable news. Findings indicate that banking ties increase analysts' hesitation to reveal negative news, and hence reforms must carefully consider the incentives of affiliated and unaffiliated analysts to initiate coverage and convey results of their research.

Legal issues & crime, Investment Banking and Securities Dealing, Government regulation (cont), Investment Banking, Government regulation, Investment advice, Investment Advisory Services, Security brokers and dealers, Legal/Government Regulation, Laws, regulations and rules, Investment banks, Investment advisers

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