Effects of managerial overconfidence on analyst recommendations

This study investigates the relation between managerial overconfidence and analyst recommendations. The empirical finding shows that analysts are less likely to issue upgrade recommendations for firms managed by overconfident CEOs. Similarly, analysts spend a longer time to upgrade stocks associated...

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Bibliographic Details
Published inReview of quantitative finance and accounting Vol. 53; no. 1; pp. 73 - 99
Main Authors Lin, Mei-Chen, Ho, Po-Hsin, Chih, Hsiang-Lin
Format Journal Article
LanguageEnglish
Published New York Springer US 01.07.2019
Springer Nature B.V
Subjects
Accounting/Auditing
Analysts
Chief executive officers
Chief executives
Companies
Confidence
Corporate Finance
Econometrics
Economics and Finance
Finance
Managers
Operations Research/Decision Theory
Original Research
Securities analysis
Analyst experience
G40
Managerial overconfidence
Analyst recommendation
G11
G10
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Summary:This study investigates the relation between managerial overconfidence and analyst recommendations. The empirical finding shows that analysts are less likely to issue upgrade recommendations for firms managed by overconfident CEOs. Similarly, analysts spend a longer time to upgrade stocks associated with overconfident CEOs. The effect of CEO overconfidence on recommendation revisions is non-monotonic. Analysts are more reluctant to upgrade firms with highly-overconfident CEOs. More experienced analysts are less susceptible to managerial overconfidence. Moreover, investors exhibit stronger response to recommendations for firms with overconfident CEOs.
ISSN:0924-865X
1573-7179
DOI:10.1007/s11156-018-0743-4