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Do Opinions on Financial Misstatement Firms Affect Analysts’ Reputation with Investors? Evidence from Reputational Spillovers
Author(s) -
LEE LIAN FEN,
LO ALVIS K.
Publication year - 2016
Publication title -
journal of accounting research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 6.767
H-Index - 141
eISSN - 1475-679X
pISSN - 0021-8456
DOI - 10.1111/1475-679x.12119
Subject(s) - reputation , revelation , affect (linguistics) , earnings , business , negative information , accounting , monetary economics , finance , economics , psychology , social psychology , law , political science , communication , art , literature
We examine whether opinions on firms subsequently revealed to have misstated earnings affect analysts’ reputation with investors. We find that positive opinions by bullish analysts hurt their reputation, leading investors to react less to their research on non‐misstatement firms after the misstatement revelation (i.e., negative spillovers). We also find that bearish analysts issuing more negative opinions gain reputation and experience positive spillovers. Finally, for analysts who dropped coverage of the misstatement firm before the misstatement revelation, we find no spillovers, which suggests that analysts experience limited reputational gains when they did not issue a public negative opinion.