Understanding and Managing Information Intermediaries
Description
Brian Bushee is investigating whether information intermediaries such as institutional investors and financial analysts are sophisticated and efficient users of accounting information and whether these intermediaries' decisions influence the choices made by corporate managers. Recently, Bushee has found evidence that corporate managers are less likely to sacrifice long-term investment to meet current earnings goals when their company has a large proportion of ownership by institutional investors, but more likely to sacrifice investment when such ownership is dominated by institutional investors following "momentum" trading strategies (i.e. buying [selling] firms with good [bad] earnings news). In work with Jeffery Abarbanell of the University of North Carolina, Bushee has documented that financial analysts do not fully impound the information in certain key accounting ratios into their forecasts of future earnings. Bushee is currently investigating why some managers try to attract certain types of information intermediaries to follow or to invest in their companies.