Security Analyst Monitoring Activity: Agency Costs and Information Demands

Moyer, R. Charles; Chatfield, Robert E.; Sisneros, Phillip M.

doi:10.2307/2330982

Cited by 230 publications

(117 citation statements)

References 17 publications

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“…Furthermore, since the information environment is of better quality if agency costs are lower and analysts serve as information providers, there is less usefulness of, and demand for, the analyst report (Jiraporn et al (2014)). Moyer et al (1989) provide empirical evidence supporting this scenario and find that managerial ownership decreases analyst coverage for firms in the S&P 500. Alternatively, Scenario 3 assumes that ownership concentration increases agency costs.…”

Section: Ownership Concentration and Analyst Coveragementioning

confidence: 79%

“…Scenario 1 considers that ownership concentration decreases agency costs. Since large shareholders may monitor managers and ensure that the interests of both sides are aligned, outside monitoring by analysts is less important and less needed by external shareholders (Moyer et al (1989)). Furthermore, since the information environment is of better quality if agency costs are lower and analysts serve as information providers, there is less usefulness of, and demand for, the analyst report (Jiraporn et al (2014)).…”

Section: Ownership Concentration and Analyst Coveragementioning

confidence: 99%

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Family Firms and Financial Analyst Activity

Eugster

2017

SSRN Journal

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Section: Ownership Concentration and Analyst Coveragementioning

confidence: 79%

Section: Ownership Concentration and Analyst Coveragementioning

confidence: 99%

Family Firms and Financial Analyst Activity

Eugster

2017

SSRN Journal

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“…Bhushan (1989), Moyer, Chatfield, and Sisneros (1989), and Brennan and Hughes (1991) find that analyst following is positively associated with these variables, and are thus considered as the more common control variables. 9 The INSIDE variable used in the analysis measures the percent of common shares held by insiders (i.e., managers and members of the board of directors).…”

Section: Variable Measurementmentioning

confidence: 99%

Security Analysis, Agency Costs and UK Firm Characteristics

2001

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The purpose of this paper is to assess the monitoring power of security analysts from the manager-shareholder conflict perspective. Using a net sample of 1,027 UK firms tracked by security analysts over the 1998-2000 period, our evidence supports the view that security analysis acts as a monitoring mechanism in reducing agency costs. More importantly, we also find that security analysts are more effective in reducing managerial non-value maximising behaviour for smaller and more focused firms rather than larger and more diversified firms supporting the supposition that as firms grow larger and more complex, the monitoring activity of security analysis becomes less effective with firm size. In addition, the evidence points out that security analysis has a positive and significant impact on firm value for smaller firms as opposed to larger ones. Overall, the UK findings suggest that the monitoring role of security analysts is not restricted to the U.S. capital market environment.Key words: Security Analysis; Analyst Coverage; Agency Costs; Firm Value. Business and Public Administration, Old Dominion University, Norfolk, VA 23529-0218, Tel:(757) Fax:(757) 683-5639, E-mail: jdoukas@stern.nyu We are grateful for the financial support provided by The Leverhulme Trust. We would also like to acknowledge Multx Global Estimates for providing most of the data comprising this paper possible. JEL classifications: G24, G34 *Department of Finance, Stern School of Business, NYU, School of 1 Security Analysis, Agency Costs, and UK Firm Characteristics AbstractThe purpose of this paper is to assess the monitoring power of security analysts from the manager-shareholder conflict perspective. Using a net sample of 1,027 UK firms tracked by security analysts over the 1998-2000 period, our evidence supports the view that security analysis acts as a monitoring mechanism in reducing agency costs. More importantly, we also find that security analysts are more effective in reducing managerial non-value maximising behaviour for smaller and more focused firms rather than larger and more diversified firms supporting the supposition that as firms grow larger and more complex, the monitoring activity of security analysis becomes less effective with firm size. In addition, the evidence points out that security analysis has a positive and significant impact on firm value for smaller firms as opposed to larger ones. Overall, the UK findings suggest that the monitoring role of security analysts is not restricted to the U.S. capital market environment.

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“…For example Moyer, Chatfield and Sisneros (1989) find that security analysts' monitoring activities are lower when the firm is a public utility. In general, the finance literature that examined the dividend behaviour of regulated firms focused on the role that dividend payouts play in the monitoring process to reduce equity agency costs within capital markets (Miller, 1986;Smith, 1986;and Hansen, Kumar and Shome, 1994).…”

Section: Introductionmentioning

confidence: 99%

Dividend Policy in Regulated Firms

et al. 2013

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We study the impact of different regulatory and ownership regimes on the dividend policy of regulated firms. Using a panel of 106 publicly traded European electric utilities in the period 1986-2010, we link payout and smoothing decisions to the implementation of different regulatory mechanisms (cost plus vs. incentive regulation) and to firm ownership (state vs. private). After controlling for the potential endogeneity of the regulatory mechanism, our results show that utilities subject to incentive regulation smooth their dividends less than firms subject to cost-based regulation and present higher impact effects and target payout ratios.This suggests that when managers are more sensitive to competition-like efficiency pressures following the adoption of incentive regulation, they adopt a dividend policy more responsive to earnings variability and more consistent with optimal cash management. These results, however, apply only to private utilities. If the state still has ultimate control, smoothing of dividends remains irrespective of the regulatory mechanism. It seems that corporate governance (i.e. state control) trumps regulation when it comes to dividend payout policy.

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Security Analyst Monitoring Activity: Agency Costs and Information Demands

Cited by 230 publications

References 17 publications

Family Firms and Financial Analyst Activity

Family Firms and Financial Analyst Activity

Security Analysis, Agency Costs and UK Firm Characteristics

Dividend Policy in Regulated Firms

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