Decisions of Commercial Bank Analyst Coverage
Date Issued
2004
Date
2004
Author(s)
Chen, Hueiling
DOI
en-US
Abstract
This study examines sell-side analysts’ decisions to follow a bank. We specifically investigate whether analysts’ decision to follow a commercial bank is related to their characteristics. We also investigate whether the forecast horizon and coverage intensity associate with analysts’ characteristics. Both difficulty of assessing asset portfolio value and leverage are variables to the volatility of the commercial bank share prices. We decompose costs of analyst following a bank into difficulty and leverage. The empirical results show that analyst coverage is significantly greater for banks with greater difficulty proxied by risk-weighted assets scaled by total assets, but it is insignificantly smaller for a bank with higher asset growth. We also find that analyst coverage is greater for firms with higher Tier I leverage ratio.
This study also posits and shows that high ability analysts choose to follow commercial banks with low leverage regardless of whether the headquarter of the commercial bank and the branch offices/headquarter of the brokerage house are at the same region. High ability analysts also prefer to cover banks with high asset risk when the commercial banks and brokerage house are at the same region. However, contrary to our predictions, high ability analysts do not choose to follow a commercial bank with high asset growth. Moreover, we find that analysts’ ability and forecast horizons are significantly positively correlated. This study also demonstrates that high ability analysts prefer to issue longer-term earnings forecasts. Finally, analysts’ ability is found to be significantly positively associated with coverage intensity. Consistent with the notion that high ability analysts better specialize in collecting and interpreting information than low ability analysts, high ability analysts appear to revise their earnings forecast more frequently.
Subjects
多期預測
分析師盈餘預測
預測困難度
預測修正
分析師能力
商業銀行槓桿運用
Leverage
Analyst Ability
Difficulty
Analyst Coverage
Coverage Intensity
Multiple Period Forecasts
Type
other
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