Industry Effects of Analyst Stock Revisions

Abstract

We examine the industry valuation effects of analyst stock revisions and identify the variables that influence these effects. Our results show that industry rivals experience significant abnormal returns in response to revision announcements. Although the mean stock price response suggests contagion effects, there is also evidence of significant competitive effects. The valuation effects are influenced by the magnitude of the rated firm's announcement return, along with analyst-specific and industry-specific characteristics. However, the sensitivity of the valuation effects to these characteristics is conditioned on whether the industry effects are contagious or competitive. 2006 The Southern Finance Association and the Southwestern Finance Association.

The Deterrence Effect of a Penalty for Environmental Violation

“…By extending current research from the content perspective, our work contributes to a better understanding of the nature of peer effects in the study of environmental issues. A growing body of literature on peer effects shows that corporate decisions are often made after learning and considering other firms' actions [14,17,36], and this exists in many corporate events, such as corporate liquidations [43], earning management [23], and tax [14]. Applying the peer effect in the field of corporate environmental violation is relatively novel.…”

Corporate Governance, Political Connections, and Intra‐Industry Effects: Evidence from Corporate Scandals in China

“…Studies based in the United States or other developed markets focus on announcements of significant events, such as firm bankruptcy (Lang and Stulz, 1992), dividends (Firth, 1996), stock splits (Caton, Goh, and Kohers, 2003), earnings releases (Foster, 1981), earnings restatements (Gleason et al, 2008), corrective disclosures (Akhigbe, Madura, and Newman, 2006), mergers and acquisitions (Akhigbe and Martin, 2000), stock repurchases (Otchere and Ross, 2002;Massa, Zahid, and Theo, 2007), bank loan ratings (Merli and Schatt, 2003), bank failures (Aharony and Swary, 1983;Allen and Gale, 2000), and Securities and Exchange Commission (SEC) enforcement actions (Nourayi, 1994). Studies based in the United States or other developed markets focus on announcements of significant events, such as firm bankruptcy (Lang and Stulz, 1992), dividends (Firth, 1996), stock splits (Caton, Goh, and Kohers, 2003), earnings releases (Foster, 1981), earnings restatements (Gleason et al, 2008), corrective disclosures (Akhigbe, Madura, and Newman, 2006), mergers and acquisitions (Akhigbe and Martin, 2000), stock repurchases (Otchere and Ross, 2002;Massa, Zahid, and Theo, 2007), bank loan ratings (Merli and Schatt, 2003), bank failures (Aharony and Swary, 1983;Allen and Gale, 2000), and Securities and Exchange Commission (SEC) enforcement actions (Nourayi, 1994).…”

“…The intra-industry contagion effect has been widely documented in the literature. Studies based in the United States or other developed markets focus on announcements of significant events, such as firm bankruptcy (Lang and Stulz, 1992), dividends (Firth, 1996), stock splits (Caton, Goh, and Kohers, 2003), earnings releases (Foster, 1981), earnings restatements (Gleason et al, 2008), corrective disclosures (Akhigbe, Madura, and Newman, 2006), mergers and acquisitions (Akhigbe and Martin, 2000), stock repurchases (Otchere and Ross, 2002;Massa, Zahid, and Theo, 2007), bank loan ratings (Merli and Schatt, 2003), bank failures (Aharony and Swary, 1983;Allen and Gale, 2000), and Securities and Exchange Commission (SEC) enforcement actions (Nourayi, 1994). The research says little, however, about corporate fraud events and their impact on peer firms' valuations.…”

Industry Prospects and Acquirer Returns in Diversifying Takeovers

“…The term k i , which is a measure of the bias in forecasts for firm i, is computed as the average of the forecast revision for firm i during the period that starts in month −42 and ends in month 42 (relative to the takeover announcement), excluding months −6 to 6. 10 Brous and Kini (1993) use the term k i to account for 9 Akhigbe, Madura, and Newman (2006) argue that revisions in analysts' recommendations can indicate a change in industry conditions. Consistent with their argument, they find that industry rivals experience a significantly positive (negative) effect when analysts' upgrade (downgrade) a firm.…”

“…9 9 Akhigbe, Madura, and Newman (2006) argue that revisions in analysts' recommendations can indicate a change in industry conditions. Consistent with their argument, they find that industry rivals experience a significantly positive (negative) effect when analysts' upgrade (downgrade) a firm. …”