Featured Research

from universities, journals, and other organizations

Firms With High Analyst Coverage Engage In Excessive External Financing And Capital Spending, Study Finds

Date:
September 4, 2008
Source:
Wiley-Blackwell
Summary:
A new study explores whether abnormal analyst coverage influences the extent to which companies raise funds from external sources (e.g., issue bonds or sell stock) and the amount of new investments firms decide to undertake.

A new study in the journal Financial Management explored whether abnormal analyst coverage influences the extent to which companies raise funds from external sources (e.g., issue bonds or sell stock) and the amount of new investments firms decide to undertake.

John A. Doukas, Chansog Francis Kim, and Christos Pantzalis reviewed data on firms between 1980 and 2003 and used industry-adjusted metrics to measure excess analyst coverage.

Researchers found that abnormal analyst coverage plays an important role in explaining the firm’s external financing and capital spending. Results show that firms with high analyst coverage consistently engage in higher external financing than do their industry peers of similar size. Additionally, firms with high analyst coverage tend to have higher levels of investment than do firms with low analyst coverage.

They also find that firms with high analyst coverage, external financing, and capital spending realize lower future returns than do firms with low analyst coverage, external financing, and capital spending. They argue that this evidence suggests that the impact of analysts on a firm’s external financing and investment stems from excessive analyst coverage, which is a result of analysts’ self-interest and pressure to promote investment-banking transactions.

The authors conclude that their analysis shows that excessive coverage “tends to enhance the credibility of the information generated by analysts, which affects the investment decisions of existing and new investors.”


Story Source:

The above story is based on materials provided by Wiley-Blackwell. Note: Materials may be edited for content and length.


Journal Reference:

  1. Doukas et al. Do Analysts Influence Corporate Financing and Investment? Financial Management, 2008; 37 (2): 303 DOI: 10.1111/j.1755-053X.2008.00014.x

Cite This Page:

Wiley-Blackwell. "Firms With High Analyst Coverage Engage In Excessive External Financing And Capital Spending, Study Finds." ScienceDaily. ScienceDaily, 4 September 2008. <www.sciencedaily.com/releases/2008/09/080904151631.htm>.
Wiley-Blackwell. (2008, September 4). Firms With High Analyst Coverage Engage In Excessive External Financing And Capital Spending, Study Finds. ScienceDaily. Retrieved July 28, 2014 from www.sciencedaily.com/releases/2008/09/080904151631.htm
Wiley-Blackwell. "Firms With High Analyst Coverage Engage In Excessive External Financing And Capital Spending, Study Finds." ScienceDaily. www.sciencedaily.com/releases/2008/09/080904151631.htm (accessed July 28, 2014).

Share This




More Science & Society News

Monday, July 28, 2014

Featured Research

from universities, journals, and other organizations


Featured Videos

from AP, Reuters, AFP, and other news services

$15B Deal on Vets' Health Care Reached

$15B Deal on Vets' Health Care Reached

AP (July 28, 2014) A bipartisan deal to improve veterans health care would authorize at least $15 billion in emergency spending to fix a veterans program scandalized by long patient wait times and falsified records. (July 28) Video provided by AP
Powered by NewsLook.com
The Carbon Trap: US Exports Global Warming

The Carbon Trap: US Exports Global Warming

AP (July 28, 2014) AP Investigation: As the Obama administration weans the country off dirty fuels, energy companies are ramping-up overseas coal exports at a heavy price. (July 28) Video provided by AP
Powered by NewsLook.com
Russia Saves Gecko Sex Satellite, Media Has Some Fun With It

Russia Saves Gecko Sex Satellite, Media Has Some Fun With It

Newsy (July 27, 2014) The satellite is back under ground control after a tense few days, but with a gecko sex experiment on board, the media just couldn't help themselves. Video provided by Newsy
Powered by NewsLook.com
Cellphone Unlocking Bill Clears U.S. House, Heads to Obama

Cellphone Unlocking Bill Clears U.S. House, Heads to Obama

Reuters - US Online Video (July 27, 2014) Congress gets rid of pesky law that made it illegal to "unlock" mobile phones without permission, giving consumers the option to use the same phone on a competitor's wireless network. Mana Rabiee reports. Video provided by Reuters
Powered by NewsLook.com

Search ScienceDaily

Number of stories in archives: 140,361

Find with keyword(s):
Enter a keyword or phrase to search ScienceDaily for related topics and research stories.

Save/Print:
Share:

Breaking News:
from the past week

In Other News

... from NewsDaily.com

Science News

Health News

Environment News

Technology News



Save/Print:
Share:

Free Subscriptions


Get the latest science news with ScienceDaily's free email newsletters, updated daily and weekly. Or view hourly updated newsfeeds in your RSS reader:

Get Social & Mobile


Keep up to date with the latest news from ScienceDaily via social networks and mobile apps:

Have Feedback?


Tell us what you think of ScienceDaily -- we welcome both positive and negative comments. Have any problems using the site? Questions?
Mobile: iPhone Android Web
Follow: Facebook Twitter Google+
Subscribe: RSS Feeds Email Newsletters
Latest Headlines Health & Medicine Mind & Brain Space & Time Matter & Energy Computers & Math Plants & Animals Earth & Climate Fossils & Ruins