Business Commons^™

Consistency Between Earnings Forecasts And Stock Recommendations : The Effect Of Political Connections, Elio Alfonso

LSU Doctoral Dissertations

Financial analysts’ earnings forecasts are more consistent with stock recommendations when their earnings forecasts are more accurate (Loh and Mian 2006, Ertimur et al. 2007). This suggests that analysts use other information in their private valuation models in addition to earnings forecasts especially when earnings have greater uncertainty. Recent studies show that political connections are important for firm valuation and are associated with future positive returns and future positive operating performance (Faccio 2006, Cooper et al. 2010). In this study, I examine how a firm’s political connections affect stock recommendation informativeness as well as the efficiency with which analysts translate …