<p>The Swedish population has the world’s largest percentage of shareholders either by direct or indirect owning. Due to the increasing interest of equity capital markets, private as well as institutional investors rely on forecasts from financial analysts. The reason for this is due to the lack of expertise among investors in this area. </p><p>Due to the fact that analysts influence the Swedish stock market immensely, it’s of great interest to explore whether an analyst can be seen as a rational participant. At the same time, we would like to see what impact psychological factors have on the analysts in their work and which these psychological factors are.</p><p>To battle these questions, we have chosen to take a qualitative approach in our research, basing it on interviews. In our opinion, interviewing a person gives a more balanced picture as the respondents have the possibility to have a dialog/discussion with the interviewer. The selection of interviewees was not random, instead we chose to interview nine different financial analysts working for big popular firms in Stockholm and Copenhagen. </p><p>Our research presents the psychological factors which affect financial analysts. We are convinced to have found strong enough indications to draw general conclusions for financial analysts, active on the Nordic stock market. </p><p>The study has shown a given relation between experience and psychological effects. The awareness of the psychological impact on the stock market exists among all financial analysts. But we have found that it’s more likely for an inexperienced financial analyst to be affected by these. The factors that have the largest effect on analysts are mostly trends, herding, overreaction and noise. </p><p>Finally our research shows a psychological position of dependence for the companies the analyst value. These are the providers of information for analysts, in practice a sale recommendation can lead to less information being shared with him or her. Further on, it’s generally seen to be more commercial correct publishing a buy recommendation as these generate more incomes and business connection for the analyst’s employer. The conclusions points out that an analyst often adopts over-optimism when analysing companies.</p>

The Swedish population has the world’s largest percentage of shareholders either by direct or indirect owning. Due to the increasing interest of equity capital markets, private as well as institutional investors rely on forecasts from financial analysts. The reason for this is due to the lack of expertise among investors in this area. Due to the fact that analysts influence the Swedish stock market immensely, it’s of great interest to explore whether an analyst can be seen as a rational participant. At the same time, we would like to see what impact psychological factors have on the analysts in their work and which these psychological factors are. To battle these questions, we have chosen to take a qualitative approach in our research, basing it on interviews. In our opinion, interviewing a person gives a more balanced picture as the respondents have the possibility to have a dialog/discussion with the interviewer. The selection of interviewees was not random, instead we chose to interview nine different financial analysts working for big popular firms in Stockholm and Copenhagen. Our research presents the psychological factors which affect financial analysts. We are convinced to have found strong enough indications to draw general conclusions for financial analysts, active on the Nordic stock market. The study has shown a given relation between experience and psychological effects. The awareness of the psychological impact on the stock market exists among all financial analysts. But we have found that it’s more likely for an inexperienced financial analyst to be affected by these. The factors that have the largest effect on analysts are mostly trends, herding, overreaction and noise. Finally our research shows a psychological position of dependence for the companies the analyst value. These are the providers of information for analysts, in practice a sale recommendation can lead to less information being shared with him or her. Further on, it’s generally seen to be more commercial correct publishing a buy recommendation as these generate more incomes and business connection for the analyst’s employer. The conclusions points out that an analyst often adopts over-optimism when analysing companies.

Financial analysts play an intermediary role in financial markets, resulting in two steps for information to be fully absorbed into the stock price: analysts reaction to information, and investors reaction to analysts recommendations. Thus any observed inefficiency in stock pricing could result from two possibilities: analysts failed to fully incorporate the market information into their stock analysis, or the information released in the analysts report is not fully believed by investors. <p>The documented optimism of financial analysts may suggest the possibility of the later case. To test the accuracy of analysts from another perspective, we follow a market microstructure model and use intraday market data to estimate the probability of an information event, the probability of good or bad news, and the rates that different traders arrive at the market. <p>By comparing those estimates based on days with and without recommendation changes, we find inconsistent results with regard to a difference in the probability of an information event. For some stocks, we do observe an increase in the likelihood of news on days when analysts change their recommendations, but this is not the case for most stocks. However, even though they are inaccurate most of the time, uninformed investors usually believe financial analysts. Furthermore, it seems that uninformed investors disbelieve analyst recommendation changes at those instances when analysts are most accurate. <p> Because of this, we hypothesise that market makers might suspect that orders in the opposite direction of an analysts recommendation change are more likely to come from informed traders. This is consistent with the intuition that most traders are uninformed and will simply follow the advice of a perceived expert, and therefore those that dont follow that advice may be more likely to have special information of their own. We check whether there are any differences in the probability of information-based trading (PIN) and for the conditional probability of information-based trading conditioned on sell (PIN|sell) and buy (PIN|buy) between days with and without recommendation changes. We did not find any significant difference, indicating that although we may observe a higher arrival rate of informed traders on recommendation change days, the probabilities of information-based trading do not change substantially. More informed traders seem to come to the market merely because the higher arrival rate of uninformed traders on recommendation days gives them a good opportunity to camouflage their behaviour. And the specialists likely would not have to change their behaviour on those days by increasing or shifting bid-ask spreads since the increased costs from the higher volume of informed trading are balanced by increased profits from the higher volume of uninformed trading. <p>Furthermore, regression of the probabilities of informed trading (conditional or unconditional) on firm size, trading volume, and volatility of daily return shows nothing significant, so we werent able to identify influential factors that affect informed trading or explain differences in informed trading between firms.

Financial analysts play an intermediary role in financial markets, resulting in two steps for information to be fully absorbed into the stock price: analysts reaction to information, and investors reaction to analysts recommendations. Thus any observed inefficiency in stock pricing could result from two possibilities: analysts failed to fully incorporate the market information into their stock analysis, or the information released in the analysts report is not fully believed by investors. <p>The documented optimism of financial analysts may suggest the possibility of the later case. To test the accuracy of analysts from another perspective, we follow a market microstructure model and use intraday market data to estimate the probability of an information event, the probability of good or bad news, and the rates that different traders arrive at the market. <p>By comparing those estimates based on days with and without recommendation changes, we find inconsistent results with regard to a difference in the probability of an information event. For some stocks, we do observe an increase in the likelihood of news on days when analysts change their recommendations, but this is not the case for most stocks. However, even though they are inaccurate most of the time, uninformed investors usually believe financial analysts. Furthermore, it seems that uninformed investors disbelieve analyst recommendation changes at those instances when analysts are most accurate. <p> Because of this, we hypothesise that market makers might suspect that orders in the opposite direction of an analysts recommendation change are more likely to come from informed traders. This is consistent with the intuition that most traders are uninformed and will simply follow the advice of a perceived expert, and therefore those that dont follow that advice may be more likely to have special information of their own. We check whether there are any differences in the probability of information-based trading (PIN) and for the conditional probability of information-based trading conditioned on sell (PIN|sell) and buy (PIN|buy) between days with and without recommendation changes. We did not find any significant difference, indicating that although we may observe a higher arrival rate of informed traders on recommendation change days, the probabilities of information-based trading do not change substantially. More informed traders seem to come to the market merely because the higher arrival rate of uninformed traders on recommendation days gives them a good opportunity to camouflage their behaviour. And the specialists likely would not have to change their behaviour on those days by increasing or shifting bid-ask spreads since the increased costs from the higher volume of informed trading are balanced by increased profits from the higher volume of uninformed trading. <p>Furthermore, regression of the probabilities of informed trading (conditional or unconditional) on firm size, trading volume, and volatility of daily return shows nothing significant, so we werent able to identify influential factors that affect informed trading or explain differences in informed trading between firms.

Bachelor Thesis, Program of Master of Business and Economics, 15 hp School of Business and Economics – Linnaeus University in Växjö 2FE30E:3 Spring, 2017 Authors: Sofie Areskoug and Niklas Karlén Supervisor: Damai Nasution Examiner: Natalia Semenova Keywords: Financial Analyst, Gender, Determinants of forecast accuracy, Sweden Background: The search of finding analysts who make the best forecasts has been an ongoing process since the 1930's. Determinants that can help predict the forecast accuracy of the analysts are in the interest of both investors and brokerage houses. Newer research in this area has taken gender of the analyst into consideration. Women are widely under-represented in the analyst occupation and there is evidence that investors are apprehensive toward women in the financial sector. Purpose: The aim of this thesis is to examine determinants of forecast accuracy regarding analysts covering Swedish companies. The authors have confidence in the research to benefit investors in their decisions on the Swedish stock market. In addition, the authors aim to shed light on the unequal gender representation of female analysts. Method: This thesis has examined 519 individual scores of forecast accuracy from 284 financial analysts covering stocks on the Swedish Index OMXS30. The forecasts are from the years 2016 and 2017. This study has a quantitative strategy and the data have been tested by an OLS estimates regression. Results: The empirical evidence shows that being a female analyst have a statistically significant positive effect on forecast accuracy. Female analysts covering Swedish stocks seem to outperform their male colleagues. Furthermore, insignificant results were found for firm complexity, industry complexity, brokerage house and analyst experience.

My dissertation consists of three chapters that examine how information production by financial intermediaries impacts on the capital market.My first chapter investigates whether extreme but rare events, i.e., major climatic disasters, influence the productivity of professional financial analysts, whose output is highly crucial in the capital market. We use 21 major natural disasters in the U.S. and find that disaster-zone analysts reduce their forecast accuracy by reiterating their previous forecast within 3 months after disasters. This effect is driven by distracted attention, rather than resource constraints. Though the effect is short term, we reveal a spillover negative impact from climatic disasters to information environment of firms which do not experience disasters, via the channel of disaster-zone analysts, highlighting the importance of the financial intermediary and also the economic consequences of severe climate events. My second chapter is motivated by the increasing global expansion by U.S. firms in recent decades and examines how geographic distribution of U.S. firms’ offshore network affects the coverage incentive of non-U.S. analysts. We combine analyst country location database and the novel dataset of offshore activities by Hoberg and Moon (2017) who quantify a U.S. firm’s local exposure in a foreign country and we discover that foreign analysts, are more likely to initiate coverage of U.S. firms with offshore activities in their domiciled countries and provide more accurate forecasts compared to non-domiciled foreign analysts. This study uncovers an important channel, i.e., offshore network, through which non-U.S. analysts can contributes to U.S. market with information advantage. In my third chapter, I study an emerging group of equity analysts, i.e., social media analysts, who post equity research on social media platforms and share investment opinions. I employ initial public offering (IPO) as a laboratory setting because during pre-IPO period, a period with high information asymmetry, professional sell-side analysts are restricted to issue reports under the restriction enforced by SEC, which provides a great setting to study the informational role of this group. I exploit research articles on Seeking Alpha website and find that pre-IPO social media analyst coverage has a positive impact on first day initial return, with the effect driven by heightened retail investor attention. This study highlights the role of social media analysts, as a new information intermediary in the capital market during the internet era. / Business Administration/Finance

The role of analysts in corporate governance has been examined extensively in the accounting literature. Two conflicting representations of the influence of analysts have emerged. Analysts are either viewed as external monitors of corporate behavior, thereby reducing agency costs; or they are viewed as exerting additional pressure on management to meet earnings forecasts, which may contribute to aggressive corporate behavior. Studies exist that examine the impact of analyst coverage in a financial reporting context. The purpose of this study is to examine the role of analysts in the corporate tax reporting context. This dissertation examines the impact of analyst coverage on corporate tax aggressiveness using a cross-section of publicly traded firms between 1992 and 2006. Permanent discretionary book-tax differences are used to proxy for tax aggressiveness. The relation is examined using ordinary least squares regression as well as two-stage least squares regression using expected coverage and inclusion in the S&P 500 index as instrumented variables to account for the endogeneity of analyst coverage selections. Additional analyses investigate the impact of analyst characteristics: experience as an analyst, experience covering a specific firm and identification as a top analyst. Results indicate that analyst coverage is associated with lower levels of tax aggressiveness. This finding suggests that analysts serve as external monitors of corporate tax behavior. In addition, more experienced analysts are associated with lower levels of tax aggressiveness indicating an improvement in monitoring ability with experience. Analysts identified as All-American analysts by Institutional Investor magazine are associated with higher levels of tax aggressiveness. This result suggests that top analysts may view aggressive tax behavior as a wealth creation tool for firms. / Ph. D.

Syfte: Tidigare forskning har visat på en bristande användning av hållbarhetsrapporter i analysprocessen vilket kan hänföras till en misstro för hållbarhetsinformation och avsaknad av kvalitetskriterier för informationsvärdering. Därför är syftet med studien att skapa förståelse för vilka kvalitetskriterier finansanalytiker efterfrågar i hållbarhetsrapporter. I syftet ingår även att belysa huruvida en reglering kan tänkas möta finansanalytikernas behov. Metod: Vår studie anammar ett hermeneutiskt perspektiv därav präglas forskningsgapet som studeras av socialkonstruktivismen. Genom att ta fasta på en abduktiv forskningsansats samlas teori och empiri genom en iterativ process. Studien tillämpar en kvalitativ undersökningsmetod där den empiriska datainsamlingen sker genom intervjuer. Den teoretiska referensramen är uppbyggd av tidigare forskning och där samma teman och rubriker även går igen i både empiri- och analysdelen. Resultat &amp; slutsats: Resultatet av studien tyder på att det inte går att tillämpa samma värderingsmetoder som för den finansiella redovisningen. Finansanalytiker efterfrågar andra typer av kvalitetskriterier för att säkerhetsställa och värdera hållbarhetsinformation. Det viktigaste kriteriet för hållbarhetsinformation visar sig vara relevans, vilket ligger i grund för efterfrågan på branschspecifika information. Förslag till fortsatt forskning: Hållbarhetsrapportering fortfarande är ett relativt nytt fenomen inom finansvärlden och flera av respondenterna tror på en snabb utveckling av området samt möjligheten att utveckla nyckeltal inom området. Det gör att det skulle vara intressant om en liknande studie gjordes i ett senare skede om cirka fem år för att se om det utvecklats några branschspecifika standarder för och nyckeltal inom hållbarhet. Uppsatsens bidrag: Vår studies bidrag som kan hänföras till praktiken är förståelsen att hållbarhetsinformation och finansiell information inte kan avläsas på samma sätt, utan andra värderingsmetoder bör användas för hållbarhetsinformation. Den här studien bereder väg i hur hållbarhetsinformation ska värderas och hänvisar till att olika intressegrupper tillsammans med företag, gemensamt ska komma fram till olika branschspecifika standarder och värderingssystem för information. Det anser vi skulle underlätta utförandet av hållbarhetsrapporteringen men även hur den ska avläsas för bästa tillämpning. / Aim: Previous research has shown a lack of use of sustainability reports in the analysis process, which can be assigned to distrust in the information and a lack of criteria for the evaluation of information. Therefore, the aim of this study is to understand which criteria financial analysts demand in sustainability reports. The aim is also to illustrate whether a regulation can meet the needs of financial analysts. Method: The study adopts a hermeneutic perspective and the research gap that’s being studied is considered to be characterized by social constructivism. By taking part in an abductive research our theory and empiricism approach together through an iterative process. The study applies a qualitative research where empirical data are collected through interviews. The theoretical framework is constructed of previous research and the same themes and headlines runs throughout both empirical and analytical sections. Result &amp; Conclusions: The results of the study suggest that it isn’t possible to apply the same kind of reporting and key performance indicators in sustainability reports as used in the financial statements. A sustainability report is aimed more towards qualitative key indicators, which isn’t always possible to measure and compare. The main criteria for sustainability information prove to be relevance, which we can see is one of the causes for the demand of industry-specific key indicators. Suggestions for future research: Sustainability reporting is still a relatively new phenomenon in the world of finance, and several of the respondents believe in the rapid development in sustainable thinking and the possibility of developing key indicators in the field. This means that it would be interesting to do a similar study at a later time to see the development of industry-specific standards and indicators of sustainability.  Contribution of the thesis: The study's contributions relate to the practice, understanding that sustainability information and financial information can’t be read in the same way, that other methods should be used for sustainability information. This study shows how sustainable information should be valued and refer to various interest groups together with the companies to jointly come up with various industry-specific standards. These we believe would facilitate the execution of sustainability reporting, but also how it should be read for the best application.

This PhD thesis consists of three empirical papers. Each paper can be read independently. However, all three papers investigate different factors affecting the performance of firms involved in mergers and acquisitions (M&As) and initial public offerings (IPOs). A private firm seeking to become listed and who also wish to grow through acquisition can do so with an IPO followed by acquisitions or a reverse takeover (RT). In a RT, a private firm is acquired by a public firm, but the private firm controls the combined public entity after completion of the deal. Chapter 2, 'Post-acquisition performance when firms list and acquire simultaneously versus sequentially: Reverse takeover versus IPO-M&As', examines the differential performance of firms conducting an IPO prior to undertaking follow-on acquisitions (IPO-M&As) versus firms that combine the process of obtaining the listing and acquiring another firm by conducting a RT. I investigate how acquirers' choices affect their post-acquisition performances. In this paper, I also investigate the impact of board structure changes on firm performance in IPO-M&A and RT deals. This event study covers RTs and acquisition-motived IPOs listed on the London Stock Exchange during 1995-2012. Challenging the theoretical expectation that IPOs increase the likelihood of optimal exercise of acquisition options by reducing valuation uncertainty, my results show that an IPO does not alleviate the stock market underperformance of acquirers within 3 years post-acquisition. Private firms seem to self-select into different listing-and-acquisition routes depending on firm-specific characteristics and the board members keep the same level of control preference. However, the choice of listing-and-acquisition does not appear to significantly affect performance. I find no significant difference in the post-acquisition performance of firms undertaking IPO-M&As or RTs. Chapter 3, 'Post-acquisition performance of target firms: The impact of management turnover', investigates the efficiency of the takeover market and the impact of management turnover on target firm performance. Investigating separately the operating performance of targets and acquirers in U.K. domestic acquisitions during 2006-2014, I find that the post-acquisition peer-adjusted profits significantly improve in the unprofitable targets but do not change significantly in profitable targets. Both profitable and unprofitable targets experienced high management turnovers, but the improvement in profits does not appear to be driven by the management turnover. The reason of management turnovers is more complex than the acquisitions' market discipline function or resource-based management hypothesis. However, a complete turnover of top management in target firms seems to hurt the post-acquisition performance of acquirers, suggesting target management team may possess valuable information to facilitate the integration process. This study sheds light on the post-acquisition restructuring of target firms and their management teams, especially in private targets. Chapter 4, 'Identifying leaders among IPO firms: a content analysis of analyst coverage reports', investigates how analysts identify firms as a leader and whether leader firms go on to generate superior operating performance to non-leaders. Using a content analysis approach, I extract sentences including the keyword 'lead' from initial coverage reports and pick out sentences where the IPO firm is identified as either an 'industry leader' or 'partial leader'. I examine the textual content of initial coverage reports on U.S. IPOs during 1999-2012 and find that lead-underwriter analysts appear not to be more optimistic than non-lead-underwriters in their leadership identification of IPO firms, however, nor are they more accurate than non-lead-underwriters in identifying leader firms. I find that neither firms identified by analysts as industry leaders nor firms identified as having partial leadership advantages tend to generate superior peer-adjusted net sales or profit margins compared to non-leaders. The Global Settlement in 2003 significantly reduced the likelihood, frequency and intensity of partial leadership identification. Although there is no explicit regulation requirement on the text content in analyst reports, analysts have become more conservative in identifying a firm as a leader after the Global Settlement. This study helps investors to understand the incremental information of leadership identification in analyst reports, beyond the quantitative outputs such as stock recommendations.

L'efficience fondamentale, i.e. l'efficience comprise comme conformité de la valorisation par les marchés financiers à la valeur fondamentale des titres est en tant que telle peu testée. Notre recherche vise à renouveler ses modes de test en se basant sur une conception constructiviste de la valeur fondamentale. Ce renouvellement, axé sur l'adoption d'un point de vue d'investi, est mis en oeuvre sur 4 cas de sociétés cotées françaises sur une période de 3 ans. La première partie de la thèse est consacrée à l'identification des acteurs les plus légitimés de ce type d'expression publique. Elle montre que ce sont les analystes financiers sell-side. La deuxième partie étudie la relation entre l'estimation publique de la valeur fondamentale par ces acteurs et l'évolution des cours. Elle aboutit au constat d'une estimation fortement dépendante de la dynamique du marché. La troisième partie apporte des éléments d'explication de ce constat en présentant sous la forme d'une configuration le mode d'interdépendance dans lequel s'inscrivent à la fois les analystes, les investisseurs et d'autres acteurs. / Fundamental efficiency, i.e. efficiency understood as the fact financial asset prices reflect their intrinsic value is as such rarely tested. Our research aims at a renewal of its test modes based on a constructivist conception of intrinsic value. This renewal, centered on an investee’s point of view, is implemented on 4 cases of French listed firms on a 3-year period. The first part of the thesis is devoted to the identification of the most recognized actors of this kind of public expression. It shows these are the sell-side financial analysts. The second part studies the relationship between the public appraisal of intrinsic value by these actors and stock price changes. It establishes this appraisal heavily depends on market dynamics. The third part tries to explain this by displaying as a figuration the interdependence mode in which analysts, investors and other actors are all involved.