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Independent and Affiliated Analysts: Disciplining and Herding

Publication ,  Journal Article
Xue, H
Published in: The Accounting Review
July 1, 2017

The paper investigates strategic interactions between an independent analyst and an affiliated analyst in the context of issuing stock recommendations. Compared to the independent analyst, the affiliated analyst has superior information, but faces a conflict of interest. I show that the independent analyst disciplines the affiliated analyst's biased forecasting behavior. Meanwhile, the independent analyst sometimes herds with the affiliated analyst to improve his recommendation accuracy. Because of the affiliated analyst's conflict of interest, the value the independent analyst expects to derive from his ex post herding option is endogenous and can motivate him to acquire more information up front. As a result, herding and disciplining not only coexist, but also mutually reinforce each other. That is, there is an endogenous complementarity between the independent analyst's ex ante disciplining role and his ex post herding behavior in equilibrium.

Duke Scholars

Published In

The Accounting Review

DOI

EISSN

1558-7967

ISSN

0001-4826

Publication Date

July 1, 2017

Volume

92

Issue

4

Start / End Page

243 / 267

Publisher

American Accounting Association

Related Subject Headings

  • Accounting
  • 3502 Banking, finance and investment
  • 3501 Accounting, auditing and accountability
  • 1501 Accounting, Auditing and Accountability
 

Citation

APA
Chicago
ICMJE
MLA
NLM
Xue, H. (2017). Independent and Affiliated Analysts: Disciplining and Herding. The Accounting Review, 92(4), 243–267. https://doi.org/10.2308/accr-51631
Xue, Hao. “Independent and Affiliated Analysts: Disciplining and Herding.” The Accounting Review 92, no. 4 (July 1, 2017): 243–67. https://doi.org/10.2308/accr-51631.
Xue H. Independent and Affiliated Analysts: Disciplining and Herding. The Accounting Review. 2017 Jul 1;92(4):243–67.
Xue, Hao. “Independent and Affiliated Analysts: Disciplining and Herding.” The Accounting Review, vol. 92, no. 4, American Accounting Association, July 2017, pp. 243–67. Crossref, doi:10.2308/accr-51631.
Xue H. Independent and Affiliated Analysts: Disciplining and Herding. The Accounting Review. American Accounting Association; 2017 Jul 1;92(4):243–267.

Published In

The Accounting Review

DOI

EISSN

1558-7967

ISSN

0001-4826

Publication Date

July 1, 2017

Volume

92

Issue

4

Start / End Page

243 / 267

Publisher

American Accounting Association

Related Subject Headings

  • Accounting
  • 3502 Banking, finance and investment
  • 3501 Accounting, auditing and accountability
  • 1501 Accounting, Auditing and Accountability