Journal article
Learning and incentive: A study on analyst response to pension underfunding
Journal of banking & finance, Vol.45(1), pp.26-42
08/01/2014
DOI: 10.1016/j.jbankfin.2014.04.001
Abstract
There is a long-standing debate on whether sell-side analysts learn from their experience to improve earnings forecast skills. This study shows that incentive is an important factor for understanding the “learning by doing” effect by analysts. We examine analysts’ response to a complex type of information – corporate pension underfunding. Pension underfunding negatively impacts future earnings and analysts on average underreact to such information in their earnings forecasts. More importantly, when there is a strong incentive for analysts to deliver accurate forecasts, analyst learning effectively reduces their underreaction to pension underfunding information. On the other hand, when such an incentive is absent, the analyst learning effect is not discernible in the data. Further evidence suggests that analyst learning and incentive jointly reduce stock market mispricing associated with corporate pension underfunding.
Details
- Title: Subtitle
- Learning and incentive: A study on analyst response to pension underfunding
- Creators
- Xuanjuan Chen - Shanghai University of Finance and EconomicsTong Yao - Department of Finance, University of Iowa, United StatesTong Yu - University of Rhode IslandTing Zhang - University of Dayton
- Resource Type
- Journal article
- Publication Details
- Journal of banking & finance, Vol.45(1), pp.26-42
- Publisher
- Elsevier B.V
- DOI
- 10.1016/j.jbankfin.2014.04.001
- ISSN
- 0378-4266
- eISSN
- 1872-6372
- Language
- English
- Date published
- 08/01/2014
- Academic Unit
- Finance
- Record Identifier
- 9984380394202771
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