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Ownership structure and analysts' earnings forecasts: UK evidence

Mira, Svetlana 2007. Ownership structure and analysts' earnings forecasts: UK evidence. [Working Paper]. Cardiff Accounting and Finance Working Papers.

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Abstract

This study investigates the association between the ownership structure of a firm and the accuracy of individual one-year-ahead earnings forecasts made by UK analysts. The relationship is explored in the presence of individual analyst and firm-specific characteristics using a research-tailored dataset comprising 11,659 individual analysts’ forecasts made over the period, 1996 to 2001. To address the multidimensional variation in the dependent variables employed in the study (i.e., a forecast made by analyst i for firm j in year t) and the unique nature of the research question (i.e., the combined use of firm and analyst-specific characteristics), we use an analyst-firm fixed effects estimator. We are not aware of any UK studies in the field that investigate the role of ownership structure of a firm in determining the accuracy of analysts’ forecasts. Furthermore, to the best of our knowledge, use of the analyst-firm fixed effect estimator in this context is also novel. The results of the study suggest that insider ownership is associated with forecast accuracy in a non-linear way. Moreover, although analysts are more optimistic for firms with a higher institutional ownership, institutional shareholders seem to be ineffective at addressing the agency disclosure problem. As a result, forecasts made for high institutional ownership firms are less accurate.

Item Type: Monograph (Working Paper)
Date Type: Publication
Status: Published
Schools: Business (Including Economics)
Subjects: H Social Sciences > HF Commerce > HF5601 Accounting
Uncontrolled Keywords: Analysts’ forecasts, ownership structure
Publisher: Cardiff Accounting and Finance Working Papers
ISSN: 1750-6638
Date of First Compliant Deposit: 30 March 2016
Last Modified: 26 Jul 2018 12:49
URI: http://orca.cf.ac.uk/id/eprint/2763

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