Do Analysts Anticipate Firms In Financial Distress?

• Main Authors: Yueh-Hui Wang, 王悅慧
• Other Authors: Hsiang-Ping Tsai
• Format: Others
• Language: en_US
• Published: 2009
• Online Access: http://ndltd.ncl.edu.tw/handle/63889004271792741601

碩士 === 元智大學 === 財務金融學系 === 97 === This study aims to examine whether analysts have abilities to detect corporate financial distress and to discuss the changes in analysts’ behavior prior to the delisting dates of financial distress. Two analysts’ actions are considered. One is that analyst stop providing earnings forecasts (i.e., drop coverage) for a firm. The other is downgrading recommendations. Using financially distressed firms in U.S.A. from 1996 to 2008 and constructing three models, the results are as follows. First, comparing failing firms and normal ones one year prior to the delisting dates, the probit model results show that analysts send warning messages by dropping coverage and by downgrading recommendations for market participants. Second, focusing on analysts’ behavior three years prior to delisting dates, the order probit model results suggest that more experienced analysts tend to drop coverage instead of revising down recommendation on financially distressed firms earlier. Third, by survival analysis, more experienced analysts drop coverage more slowly but revise down recommendations more quickly than those who are less experienced.