School of Accountancy Faculty Publications and Presentations
Document Type
Article
Publication Date
2019
Abstract
We examine the association of insider ownership with financial analysts’ forecast accuracy and dispersion in a sample of U.S. dual-class firms. Insider ownership exerts two effects: a positive incentive effect and a negative entrenchment effect. The lack of significant findings in prior research regarding the association between insider ownership and forecast accuracy may be attributable to the offsetting forces of these two effects. Using a comprehensive hand-collected sample of U.S. firms that maintain more than one class of common stock, we are able to disentangle incentive and entrenchment effects which are confounded in single-class firms. We find that disproportionate insider control is negatively associated with forecast accuracy and positively associated with forecast dispersion. Moreover, insider cash flow rights (insider voting rights) are positively (negatively) associated with forecast accuracy and negatively (positively) associated with forecast dispersion, consistent with incentive-alignment and entrenchment effects of ownership affecting financial analysts’ forecasting environment in opposite directions.
Recommended Citation
Forst, A., Hettler, B. and Barniv, R.R., 2019. Insider ownership and financial analysts’ information environment: Evidence from dual-class firms. Journal of Accounting, Auditing & Finance, 34(1), pp.30-53. https://doi.org/10.1177/0148558X16670048
Publication Title
Journal of Accounting, Auditing & Finance
DOI
10.1177/0148558X16670048
Comments
Original published version available at https://doi.org/10.1177/0148558X16670048