Analyzing Analyst Research: A Review of Past Coverage and Recommendations for Future Research

Abstract

As visible and knowledgeable experts who constantly collect, analyze, and disseminate information about the future prospects of publicly listed firms, financial analysts fulfill an important information brokerage and monitoring function for investors. By providing investment advice, financial analysts also influence the demand for a firm’s stock and thus its price. Executives pay close attention to financial analysts’ earnings forecasts and recommendations, so much so that they are frequently criticized for excessive focus on their forecasts at the expense of the long-term interests of the firm. But while research on analysts in strategic management is steadily growing, we lack a coherent understanding of the extent and nature of analysts’ diverse influences on executives’ and investors’ decision making and the context in which analysts operate. This is largely due to the fragmentation of the literature and the absence of prior reviews or meta-analyses of the topic. By organizing, synthesizing, and analyzing extant research efforts on analysts in the various domains of strategic management research, we aim to advance our knowledge on the influence of analysts on firms and investors. Further, we hope that our analyses and recommendations help further increase research coverage on this important organizational stakeholder.