In the first chapter, I investigate how external analyst forecasts influence managerial earnings decisions. Using shifts in analyst composition effected by brokerage mergers as a source of exogenous variation, I establish a one-to-one response of firm earnings to analyst forecasts. This response is driven by accounting accruals, consistent with short-termist earnings management. I find that the market perceives these accruals as costly to the firm. I present a model where this behavior emerges as a rational equilibrium, confirmed by a calibration that mirrors a one-to-one forecast-earnings relationship. Calibration outcomes align with real-world earnings and forecast patterns.
In the second chapter (co-authored with Harrison Hong and Jeffrey Kubik), we estimate the cost to capital of climate policy. Many US states have set ambitious renewable portfolio standards (RPS) that require utilities to switch from fossil fuels toward renewables. RPS increases the renewables capacity, bond issuance, maturity, and yield spreads of investor-owned utilities compared to municipal producers that are exempted from this climate policy. Contrary to stranded-asset concerns, the hit to overall firm financial health is moderate. Falling cost of renewables and pass through of these costs to consumers mitigate the burden of RPS on firms. Using a Tobin’s 𝒒 model, we show that, absent these mitigating factors, the impact of RPS on firm valuations would have been severe.
In the third chapter (co-authored with Lukas Fischer), we identify a source of peer group influence that is plausibly orthogonal to information provision, yet nonetheless affects economic decision-making: the shock to an equity analyst of their undergraduate college football team winning the NCAA Championship Game. We find that analysts’ forecasts respond positively to their undergraduate school’s football team winning the NCAA final. We then show that the shock of ‘winning’ spreads within an analyst’s brokerage, positively influencing the forecasts of their colleagues. Brokerages where the degree of this diffusion is greater have lower female representation in their analyst teams, as well as lower ESG scores.
| Identifer | oai:union.ndltd.org:columbia.edu/oai:academiccommons.columbia.edu:10.7916/gzqr-b687 |
| Date | January 2024 |
| Creators | Shore, Edward Peter |
| Source Sets | Columbia University |
| Language | English |
| Detected Language | English |
| Type | Theses |
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