Essays on Financial Analyst Forecasts and Recommendations

The trade of the financial analyst is currently a much-debated issue in today’s media. As a large part of the investment analysis is conducted under the broker firms’ regime, the incentives of the financial analyst and the investor do not always align. The broker firm’s commercial incentives may be to maximise its commission from securities trading and underwriting fees. The purpose of this thesis is to extend our understanding of the work of a financial analyst, the incentives he faces and how these affect his actions. The first essay investigates how the economic significance of the coverage of a particular firm impacts the analysts’ accuracy of estimation. The hypothesis is that analysts put more effort in analysing firms with a relatively higher trading volume, as these firms usually yield higher commissions. The second essay investigates how analysts interpret new financial statement information. The essay shows that analysts underreact or overreact to prior reported earnings, depending on the short-term pattern in reported earnings. The third essay investigates the possible investment value in Finnish stock recommendations, issued by sell side analysts. It is established that consensus recommendations issued on Finnish stocks contain investment value. Further, the investment value in consensus recommendations improves significantly through the exclusion of recommendations issued by banks. The fourth essay investigates investors’ behaviour prior to financial analysts’ earnings forecast revisions. Lately, the financial press have reported cases were financial analysts warn their preferred clients of possible earnings forecast revisions. However, in the light of the empirical results, it appears that the problem of analysts leaking information to some selected customers does not appear systematically on the Finnish stock market.

Leader - Follower Relations In An Intercultural Chinese Context - Personal, Interpersonal and Behavioural Influences and Impact on Work Contribution

The successful interaction between leaders and their followers is central to the overall functioning of a company. The increasingly multinational nature of modern business and the resulting multicultural and increasingly heterogeneous workforce imposes specific challenges to the development of high-quality work relationships. The Western multinational companies that have started operations in China are facing these challenges. This study examines the quality of leader-follower relationships between Western expatriate leaders and their Chinese followers as well as between Chinese leaders and their Chinese followers in Western-owned subsidiaries in China. The focus is on the influence of personal, interpersonal and behavioural factors (personality, values, cultural knowledge, perceived and actual similarity, interactional justice, and follower performance) and the work-related implications of these relationships (job attitudes and organisational citizenship behaviour). One interesting finding of this study is that Chinese followers have higher perceptions of their Western than their Chinese leaders. The results also indicate that Chinese and Western leaders’ perceptions of their followers are not influenced favourably by the same follower characteristics. In a similar vein, Chinese followers value different traits in Western versus Chinese leaders. These results, as well as the numerous more specific findings of the study, have practical implications for international human resource management and areas such as selection, placement and training. Due to the different effect of personal and interpersonal factors across groups, it is difficult to achieve the “perfect match” between leader and follower characteristics that simultaneously contribute to high-quality relationships for Chinese and Western leaders as well as for followers. However, the results indicate that the ability of organisations to enhance the quality of leader-follower relations by selecting and matching people with suitable characteristics may provide an effective means for organisations to increase positive job attitudes and hence influence work-related outcomes.