Throwing in the towel: What happens when analysts' recommendations go wrong?

IF 3.2 3区 管理学 Q1 BUSINESS, FINANCE
Kenneth Lee, Mark Aleksanyan, Elaine Harris, Melina Manochin
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Abstract

Every analyst will experience stock recommendation failures during their career. Unlike many other professions, these pivotal moments occur in the full glare of clients, colleagues, equity-sales teams, and the media. This research explores the practices of analysts up to and beyond the point where, faced with a failing recommendation, they contemplate “throwing in the towel” on their recommendation. Based on empirical evidence gathered from interviews with sell-side analysts and their key interlocutors—equity-sales specialists, investors, and investor relations officers—this paper uncovers several new empirical insights into the recommendation practices of analysts. The main argument made in the paper is that capitulation practices emerge from the specific contextual framework of individual recommendations and the analyst's conduct as a knowledgeable, emotional human agent. We identify several contextual contingencies of stock recommendations that underpin how a capitulation episode unfolds, including the temporal proximity of the capitulation to the original recommendation; the importance and profile of the stock to the analyst's reputation (“franchise intensity”); the level of interest/reaction from clients, equity-sales teams and corporates; the nature/cause of recommendation failure; and recommendation boldness. Our study provides evidence that what an analyst does when faced with a failing recommendation cannot be reduced to a predictable, rational process and informs our understanding of observed practices such as the reluctance of analysts to capitulate and why “recommendation paralysis” often follows a recommendation capitulation.

Abstract Image

认输:当分析师的建议出错时会发生什么?
每个分析师在其职业生涯中都会经历推荐股票失败的经历。与许多其他职业不同,这些关键时刻发生在客户、同事、股票销售团队和媒体的众目睽睽之下。这项研究探讨了分析师的实践,直到他们面对失败的建议时,他们考虑“放弃”他们的建议。基于对卖方分析师及其主要对话者(股票销售专家、投资者和投资者关系官员)的采访收集的经验证据,本文揭示了对分析师推荐实践的几个新的实证见解。论文中提出的主要论点是,投降行为来自于个人建议的特定背景框架,以及分析师作为一个知识渊博、情感丰富的人类代理人的行为。我们确定了股票推荐的几个背景偶然性,这些偶然性支撑了投降事件的展开,包括投降与原始推荐的时间接近;股票对分析师声誉的重要性和概况(“特许经营强度”);客户、股票销售团队和企业的兴趣程度/反应;推荐失败的性质/原因;建议大胆。我们的研究提供了证据,表明分析师在面对失败的建议时所做的事情不能简化为可预测的、理性的过程,并告知我们对观察到的实践的理解,例如分析师不愿意投降,以及为什么“建议瘫痪”经常伴随着建议投降。
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来源期刊
CiteScore
6.20
自引率
11.10%
发文量
97
期刊介绍: Contemporary Accounting Research (CAR) is the premiere research journal of the Canadian Academic Accounting Association, which publishes leading- edge research that contributes to our understanding of all aspects of accounting"s role within organizations, markets or society. Canadian based, increasingly global in scope, CAR seeks to reflect the geographical and intellectual diversity in accounting research. To accomplish this, CAR will continue to publish in its traditional areas of excellence, while seeking to more fully represent other research streams in its pages, so as to continue and expand its tradition of excellence.
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