dc.contributor.authorChen, Jonas Tao
dc.contributor.authorHarford, Jarrad
dc.contributor.authorLin, Chen
dc.identifier.citationChen, T., Harford, J., & Lin, C. (2015). Do analysts matter for governance? Evidence from natural experiments. Journal of financial economics, 115(2), 383-410.en_US
dc.description.abstractBuilding on two sources of exogenous shocks to analyst coverage (broker closures and mergers), we explore the causal effects of analyst coverage on mitigating managerial expropriation of outside shareholders. We find that as a firm experiences an exogenous decrease in analyst coverage, shareholders value internal cash holdings less, its CEO receives higher excess compensation, its management is more likely to make value-destroying acquisitions, and its managers are more likely to engage in earnings management activities. Importantly, we find that most of these effects are mainly driven by the firms with smaller initial analyst coverage and less product market competition. We further find that after exogenous brokerage exits, a CEO׳s total and excess compensation become less sensitive to firm performance in firms with low initial analyst coverage. These findings are consistent with the monitoring hypothesis, specifically that financial analysts play an important governance role in scrutinizing management behavior, and the market is pricing an increase in expected agency problems after the loss in analyst coverage.en_US
dc.relation.ispartofseriesJournal of financial economicsen_US
dc.rights© 2014 Elsevier B.V. This is the author created version of a work that has been peer reviewed and accepted for publication by Journal of Financial Economics, Elsevier B.V.. It incorporates referee’s comments but changes resulting from the publishing process, such as copyediting, structural formatting, may not be reflected in this document. The published version is available at: [http://dx.doi.org/10.1016/j.jfineco.2014.10.002].en_US
dc.titleDo analysts matter for governance? Evidence from natural experimentsen_US
dc.typeJournal Article
dc.contributor.schoolCollege of Business (Nanyang Business School)en_US
dc.description.versionAccepted versionen_US

Files in this item


This item appears in the following Collection(s)

Show simple item record