Publication Type

Journal Article

Version

acceptedVersion

Publication Date

1-2024

Abstract

We examine the effect of the common ownership relation between brokerage houses and the firms covered by their analysts (referred to as co-owned brokerage houses, co-owned firms, and connected analysts, respectively) on analyst forecast performance. Common ownership can help the connected analysts have better access to co-owned firms, leading to higher-quality analyst research. However, common owners have incentives for higher valuation of the co-owned firms and thus can exert pressure on the connected analysts to issue optimistically biased research reports for these firms. We find that common ownership improves analyst forecast accuracy. This result is robust to a difference-in-differences design that exploits exogenous shocks to common ownership. The effects vary systematically with the quality of alternative sources of information that analysts can access for the co-owned firms. Overall, our paper contributes to the literature by documenting that common ownership can facilitate information communication.

Keywords

common ownership, analyst forecasts, institutional environments

Discipline

Accounting | Corporate Finance

Research Areas

Corporate Reporting and Disclosure

Publication

European Accounting Review

Volume

33

Issue

1

First Page

223

Last Page

249

ISSN

0963-8180

Identifier

10.1080/09638180.2022.2082506

Publisher

Taylor and Francis Group

Copyright Owner and License

Authors

Additional URL

https://doi.org/10.1080/09638180.2022.2082506

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