Institutional investors, political connections and stock recommendations from sell-side analysts: the case of Malaysia
Journal of Accounting in Emerging Economies
ISSN: 2042-1168
Article publication date: 5 July 2022
Issue publication date: 28 March 2023
Abstract
Purpose
The purpose of this study is to investigate the interplay between institutional investors' ownership (IIO), politically connected firms (POC) and sell-side analysts' stock recommendations (ASR).
Design/methodology/approach
This study employs ordinary least square (OLS) regression to test the hypotheses. The sample comprises 280 Malaysian public listed companies (PLC) and encompasses the 2008–2013 time frame (a total of 735 observations).
Findings
The results show a significant and positive link between IIO and ASR. In addition, a negative association is found between POC and ASR. Moreover, the POC weakens the positive relationship between the IIO and ASR.
Research limitations/implications
One important implication of this study is that political involvement in corporate decisions is a prominent characteristic of the Malaysian market, which can significantly affect the information environment and analysts' reactions.
Practical implications
The findings of this study provide useful empirical guidance to the regulators in evaluating the efficacy of recent regulatory initiatives. Investors may also gain useful insights from this study, specifically in recognising the crucial monitoring role played by institutional investors and how politically patronised firms are viewed unfavourably by equity analysts.
Originality/value
This study is one of the first to examine the joint influence of IIO and POC, on ASR.
Keywords
Citation
Qasem, A., Wan-Hussin, W.N., Ghaleb, B.A.A. and Bamahros, H.M. (2023), "Institutional investors, political connections and stock recommendations from sell-side analysts: the case of Malaysia", Journal of Accounting in Emerging Economies, Vol. 13 No. 2, pp. 450-483. https://doi.org/10.1108/JAEE-05-2021-0177
Publisher
:Emerald Publishing Limited
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