Corporate watchdogs |
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| Authors: | Marco Navone Thomas To |
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| Institution: | 1. Finance Department, University of Technology Sydney, Broadway, New South Wales, Australia;2. Finance Department, University of Sydney, Sydney, New South Wales, Australia |
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| Abstract: | We investigate the role of financial analysts as corporate watchdogs. We show that firms that are subject to intense analyst monitoring are more likely to be investigated by the Securities and Exchange Commission or to be the subject of a securities class action. Using cross-sectional variations in managerial entrenchment, we find that this effect is not a reflection of the “dark side of analyst coverage,” analysts pushing executives to misbehave to exceed short-term expectations. Our findings are robust to different identification strategies addressing the endogeneity of analyst coverage decisions. |
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| Keywords: | financial analysts litigation risk managerial misbehavior |
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