재무연구 제 권 호 (2011년 5월)
Asian Review of Financial Research, Vol., No..
pp.136~181
pp.136~181
The Impact of CEO Power on Analyst Following
Pornsit Jiraporn Great Valley School of Graduate Professional Studies Pennsylvania State University
Young Sang Kim Haile/US Bank College of Business Northern Kentucky University
Yixin Liu University of New Hampshire Whittemore School of Business and Economics University of New Hampshire
We examine how CEO power affects the extent of analyst coverage. Due to agency conflicts, powerful CEOs may not adopt a disclosure policy that maximizes shareholders’ wealth. The amount of information disclosed by the firm influences the information environment, which affects the financial analyst’s incentives to “cover” or “follow” the firm. Consistent with this notion, we show that firms with powerful CEOs are covered by fewer analysts. In addition, the empirical evidence suggests that analyst coverage helps improve firm value. The positive effect of analyst coverage on firm value, however, is greatly mitigated in firms with powerful CEOs. Strong CEO power appears to counteract the beneficial role of analyst coverage.
Pornsit Jiraporn
Young Sang Kim
Yixin Liu
We examine how CEO power affects the extent of analyst coverage. Due to agency conflicts, powerful CEOs may not adopt a disclosure policy that maximizes shareholders’ wealth. The amount of information disclosed by the firm influences the information environment, which affects the financial analyst’s incentives to “cover” or “follow” the firm. Consistent with this notion, we show that firms with powerful CEOs are covered by fewer analysts. In addition, the empirical evidence suggests that analyst coverage helps improve firm value. The positive effect of analyst coverage on firm value, however, is greatly mitigated in firms with powerful CEOs. Strong CEO power appears to counteract the beneficial role of analyst coverage.
