The Influence of Institutional Investors on Analyst Earnings Forecast Properties
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In this study, I examine the institutional investor demand for analyst information and its effect on earnings forecast properties. Analysts are motivated to fulfill their clients’ demand for information, and institutional investors are sell-side analysts’ most important client type. Following utility maximization and time allocation theory, analysts likely prioritize their time to maximize their utility and prioritize firms with greater institutional investor demand for information. I find that analysts report more accurate forecasts for firms with greater institutional ownership, and this association is primarily driven by transient institutions, non-investment advisor institutions, institutions that do not specialize in growth firms, and institutions that specialize in value firms. In contrast, I find evidence that analysts are more likely to issue bold earnings forecasts for firms with greater ownership by institutions that are more likely to value private information (e.g., investment advisor institutions with transient investments). These findings suggest that institutional ownership influences analysts’ decision making and resource allocation, and analysts’ forecasts cater to the information demands of their clients.
Wong, Paul A. (2015). The Influence of Institutional Investors on Analyst Earnings Forecast Properties. Doctoral dissertation, Texas A & M University. Available electronically from