PhD Research Proposal Presentation: Peng Wang
Mr. Peng Wang, a doctoral student at 平特五不中 in the area of Accounting will be presenting his research proposal entitled:
Essays on Analyst long-term orientation
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Wednesday, September 18, 2024 at 8:00am 鈥� 9:30am
Student Committee Chair: Professor听Hongping Tan
Please note that the presentation will be conducted virtually on Zoom. If you wish to attend the presentation, kindly reach out to the PhD Office for the Zoom link.
ABSTRACT
CFA institute 2006 said that the excessive focus of analysts on short-term, quarterly earnings and a lack of attention to the strategy, fundamentals, and conventional approaches to long-term value creation can lead to short-termism. Therefore, they recommend analysts to have a long-term focus in their analysis. However, most of the studies find that analysts tend to fixate on quarterly earnings in their forecasts. Therefore, we aim to figure out the determinants and consequences of analyst short-term (long-term) orientation in this research, trying to provide justification to CAF institute鈥檚 recommendations.
In the first paper, we explore the determinants of short-termism in analysts鈥� equity analysis and consequences using textual analysis method. We define a new dictionary based on Brochet et al. (2015)鈥檚 long-term and short-term keywords list to make it applicable to analyst reports. The level of short-termism for an analyst report is the difference between the number of short-term and long-term words scaled by the total words, multiplied by 100. To verify the validity of our measure, we first investigate the determinants by controlling report, firm, and analyst level characteristics. Then we test whether short-term analyst reports are less likely to talk long-term topics and less informative. Finally, we aggregate our report level measure at firm level to examine whether analyst pressure to management are from short-term focused analysts. We find that short term reports are less likely to discuss long-term topics and are less informative. Moreover, management pressure from analysts are mainly driven by short-term focused analysts. Our findings provide justification for CFA institute鈥檚 recommendation that analysts should have a long-term focus in their analysis.
In the second paper, we examine how future time reference (FTR) language of analysts affects analysts鈥� future vision. Language can significantly affect people鈥檚 thoughts and behavior related to future. We extend this stream of study to analyst research because analysts鈥� main job is to analyze and predict future performance of the firms covered, and the FTR language greatly affects people鈥檚 thoughts and behaviors of the future. Therefore, analyst forecasts provide a nice setting to study the impact of FTR language on the tradeoff between the present and future. We first show that analysts from countries where languages do not require speakers to grammatically mark future event are less likely to use future tense markers (such as going to, will, and shall). Further tests show that analysts speaking weak FTR language have long term orientation and have more informative forecast as reflected by stronger market reactions to their recommendation, and earnings forecast, and target price forecasts. Our findings complement the literature on the economic consequence of language and provide insights into analysts鈥� information process.
