PhD Thesis Defense Presentation: Peng Wang
Mr. Peng Wang, a doctoral student at 黑料不打烊 University in the Accounting area will be presenting his thesis defense entitled:
Two Essays on Analysts鈥� Forecast Time Orientation
Wednesday December 11, 2024, at 10:30 a.m.
(The defense will be conducted on Zoom)
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Student Committee Chair: Professor Hongping Tan.
Please note that the Defence will be conducted on Zoom. Only the student and their committee members will participate in the presentation.
Abstract
CFA institute (2006) pointed out that excessive focus of analysts on short-term, quarterly earnings and a lack of attention to the strategy, fundamentals, and conventional approaches to long-term value creation can lead to short-termism. Previous studies find that analysts tend to fixate on short-term quarterly earnings in their forecasts. Therefore, this thesis aims to examine the determinants and consequences of analyst short-term (long-term) orientation.
The first essay explores the determinants and consequences of short-termism in analysts鈥� equity analysis using textual analysis. I define a new dictionary based on Brochet et al. (2015)鈥檚 long-term and short-term keyword lists to make it applicable to analyst reports. I define short-termism for an analyst report as the difference between the number of short-term and long-term words scaled by the total words, multiplied by 100. I examine whether short-term analyst reports are related to fewer discussions of long-term topics, less accurate, more optimistic, and less informative after controlling report-, firm-, and analyst-level characteristics. I further aggregate the report-level short-term horizon measure to the firm-level and then examine whether management pressure from analyst coverage is mainly from short-term focused analysts. I find that short-term reports discuss fewer long-term topics and are less accurate, more optimistic, and less informative. Moreover, management pressure from analysts is mainly driven by short-term focused analysts.
The second essay examines how future time reference (FTR) language of analysts affects analysts鈥� future vision and performance. I first show that analysts from countries where languages do not require speakers to grammatically mark future events use fewer future tense markers (such as going to, will, and shall). Further tests show that analysts speaking weak FTR languages have long-term orientation in equity analysis and have more informative forecasts as reflected by stronger market reactions to their recommendations, earnings forecasts, and target price forecasts. My findings not only complement the literature on the economic consequences of language but also provide insights into analysts鈥� information process. Overall, the findings in this thesis justify the call for long-term equity analysis to increase the quality of analyst research.
