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The influence of investor protection on the performance of financial analysts: Time series analyses in four different legal systems
Linnaeus University, School of Business and Economics, Department of Management Accounting and Logistics.ORCID iD: 0000-0002-5227-2046
Linnaeus University, School of Business and Economics, Department of Management Accounting and Logistics.ORCID iD: 0000-0002-1626-8410
Linnaeus University, School of Business and Economics, Department of Management Accounting and Logistics.ORCID iD: 0000-0001-5098-1618
2015 (English)In: International Journal of Disclosure & Governance, ISSN 1741-3591, E-ISSN 1746-6539, Vol. 12, no May 2015, p. 167-184Article in journal (Refereed) Published
Abstract [en]

In the corporate governance landscape there are several different groups of so-called gatekeepers who act as intermediary between the company and investors. Financial analysts represent one of these groups that have been especially tied to the question of how corporate laws affect the overall efficiency of corporate governance. It has, for example, been proposed that their performance, that is, predicting earnings per share (EPS), is influenced by the strength of the legal system in terms of investor protection. In this study we analyze this relationship in four European countries using a newly developed index for investor protection. This allows us to conduct analysis both cross-sectionally and over time, which is an opportunity for a more refined analysis of the impact of strengthened investor protection than prior studies. Our main conclusion is that there is overall support for the proposition that there is a relation between financial analysts’ performance and the strength of legal protection based on both analyses of changes over time and between countries. Their performance is better with a higher degree of investor protection. But we also claim that the analysts’ role and investor protection can be seen as a substitution for each other when working as mechanisms in the corporate governance landscape, as there is a more extensive market for analysts when there is less investor protection. The results provide an in-depth analysis of the effect of strengthened legalization and also how different corporate governance mechanisms can affect each other. This is especially of value for policy makers and academics interested in the impact and consequences of legal reforms.

Place, publisher, year, edition, pages
Palgrave Macmillan, 2015. Vol. 12, no May 2015, p. 167-184
National Category
Economics and Business Business Administration
Research subject
Economy
Identifiers
URN: urn:nbn:se:lnu:diva-40998DOI: 10.1057/jdg.2014.1ISI: 000363677400004Scopus ID: 2-s2.0-84929083198OAI: oai:DiVA.org:lnu-40998DiVA, id: diva2:796237
Available from: 2015-03-18 Created: 2015-03-18 Last updated: 2020-07-14Bibliographically approved

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von Koch, ChristopherNilsson, OlaCollin, Sven-Olof Yrjö

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