Information content of analyst recommendations in the banking industry

Premti, Arjan; García‐Feijóo, Luis; Madura, Jeff

doi:10.1016/j.irfa.2016.11.005

Cited by 21 publications

(15 citation statements)

References 71 publications

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“…8 The improved firm disclosure policies can mitigate asymmetric information between firms and external financial markets (Greenstein & Sami, 1994;Healey et al, 1999;Leuz & Verrecchia, 2000;Mohd, 2005;Welker, 1995). 9 More recent studies show that the passage of SOX significantly reduces firms' opaqueness and results in analyst earnings forecasts that are more accurate and less dispersed (Akhigbe & Martin, 2006;Arping & Sautner, 2013;Premti et al, 2017).…”

Section: Literature Review and Hypotheses Developmentmentioning

confidence: 99%

The propensity to save: The effect of Sarbanes–Oxley act

James

Lirely

2021

Rev Financ Econ

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Section: Literature Review and Hypotheses Developmentmentioning

confidence: 99%

The propensity to save: The effect of Sarbanes–Oxley act

James

Lirely

2021

Rev Financ Econ

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“…This argument would suggest a greater contagion effect for rivals with greater analyst following. Similar to Premti, Garcia-Feijoo, and Madura (2017) and Premti, Garcia-Feijoo, and Madura (2018), AnalystFollowing is calculated as the number of analysts that have issued a recommendation for the rival bank in the same calendar year.…”

Section: Impact Of Other Rival Analyst and Time Period Characteristmentioning

confidence: 99%

“…Similar to Cliff (2007), we classify as positive recommendations that are either a Buy or a Strong Buy, and as negative recommendations that are either a Sell or a Strong Sell. To ensure the robustness of our results, we follow Premti, Garcia-Feijoo, and Madura (2017) and also use a stricter classification method in which we classify as positive the recommendations that are an upgrade to Buy or an upgrade to Strong Buy recommendation, and as negative the recommendations that are a downgrade to a Sell or a downgrade to a Strong Sell recommendation. Table 4 displays the results of the multivariate regression model applied to the subsample that contains recommendations that are a Buy, a Strong Buy, a Sell, or a Strong Sell.…”

Section: Recchangementioning

confidence: 99%

“…Studies have shown that analyst recommendations provide new information, elicit an immediate reaction in stock prices (Givoly and Lakonishok, 1979;Francis and Soffer, 1997;and Moshirian, Ng, and Wu, 2009;Premti, Garcia-Feijoo, and Madura, 2017), and are useful in guiding investors' long term decisions (Womack, 1996;Boni and Womack, 2006;Premti, Garcia-Feijoo, and Madura, 2018). Analysts may also provide information about the industry, as their recommendations are often dependent on industry conditions (Piotroski and Roulstone, 2004;Akhigbe, Madura, and Newman, 2006;Liu, 2011).…”

Section: Introductionmentioning

confidence: 99%

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Spillover Effects of Analyst Recommendations in the Banking Industry

2019

JAF

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We find that analyst recommendations of banks result in spillover effects on the rival banks. The rival banks react is in the same direction as the rated bank, and the spillover effect depends on the rival's characteristics. These results suggest that the spillover effects in the banking industry are contagious and informed. The contagion effect is greater for riskier rivals and recommendations issued during riskier periods. Regulations that increased bank risk also increased the contagion of analyst recommendations. The contagion effect is greater for larger rivals and rivals with larger analyst following. The contagion effect is greater for positive recommendations.

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“…As regards the banking sector, the results of a study by Devos (2014) indicate that analysts who issue recommendations for investment banks are relatively optimistic regarding the prospects of subject banks to which they are related through syndication. An extensive study by Premti et al (2017), based on a sample of over 23 thousand analyst recommendations of 1,106 banks, demonstrates that both positive and negative analyst recommendations tend to be more informative for banks that are riskier and subject to a higher degree of information asymmetry. The usefulness of recommendations in the banking sector appears to increase when the information environment becomes more uncertain.…”

Section: The Literature Reviewmentioning

confidence: 99%

The performance of analyst recommendations in the banking sector: A case of Poland

Bolibok

2017

Zeszyty Naukowe Uniwersytetu Szczecińskiego Finanse Rynki Finansowe Ubezpieczenia

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Purpose-The paper aims at empirical evaluation of the performance of the professional stock market analysts' recommendations in the Polish banking sector. Design/methodology/approach-The employed research methods involve the analyses of structure and accuracy of the examined recommendations in terms of target prices. The examined sample covers 2,806 stock recommendations issued for 14 banks listed on the Warsaw Stock Exchange over the period 1999-2016. The performance of each recommendation was assessed over a time horizon of 180 days from its issuance through comparison with actual market prices of a given stock. Findings-Consistent with the evidence in the relevant literature the results of the study indicate that even in such complex and opaque industry as banking, the analyst recommendations should serve only as a supplementary source of information supporting the decision-making processes of the equity investors. In the specific context of the Polish banking sector the analyst recommendations performed moderately, with slightly more than 56% of them being able to correctly predict the prices of bank stocks within the 180 days time window since the issuance date. However, even if the exact target prices were often not reached, the recommendations seem useful as the indicators of the short-run price movements. Originality/value-The majority of empirical studies in the relevant literature examines the performance of analyst recommendations without taking into account the potential impact of industry-specific contextual factors. Additionally, these studies are focused mostly on developed capital markets, while the evidence for the emerging ones remains quite modest. Moreover, to date apparently no study has addressed this issue in the context of the Polish capital market. The present study attempts, therefore, to fill this gap.

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Information content of analyst recommendations in the banking industry

Cited by 21 publications

References 71 publications

The propensity to save: The effect of Sarbanes–Oxley act

The propensity to save: The effect of Sarbanes–Oxley act

Spillover Effects of Analyst Recommendations in the Banking Industry

The performance of analyst recommendations in the banking sector: A case of Poland

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