Current:Home > MarketsCEOs favor stock analysts with the same first name, study shows. Here's why.-Angel Dreamer Wealth Society D1 Reviews & Insights
CEOs favor stock analysts with the same first name, study shows. Here's why.
View Date:2024-12-23 20:59:58
Although sharing a first name with someone can create a bond, it may also give rise to illegal behavior. New research finds that company CEOs appear to give preferential treatment to securities analysts with the same first name.
The study suggests that name matching among securities analysts and CEOs may led to unfair favoritism, even prompting some chief executives to disclose privileged company information with select analysts. While CEOs typically share forecasts with analysts and investors on public conference calls and the like, securities law bars executives from sharing material information privately.
Exhibit A that something may be amiss: Over a period of 25 years, securities analysts with the same names as CEOs delivered more accurate financial forecasts than those with different first names, the researchers found. The authors of the report on name sharing and favoritism in information disclosure, which was published in the peer-reviewed journal Proceedings of the National Academy of Sciences (PNAS), say that likely isn't a coincidence.
Instead, the improved forecast accuracy suggests it is "due to CEOs privately sharing pertinent information with name-matched analysts," according to the researchers, who hail from the University of California, Berkeley, University of California, Los Angeles, Chinese University of Hong Kong-Shenzhen and Washington University in St. Louis.
The effect is even more pronounced among CEO-analyst pairs who share uncommon first names.
"After you get main results, you try to see if the relationship will be either stronger or weaker. One theory we came up with is the more uncommon the first name, the stronger the relationship between them," Omri Even-Tov, an accounting professor at University of California, Berkeley, Haas School of Business and one of the researchers behind the report, told CBS MoneyWatch.
He added, "If you have a very unique name, you probably feel more connected and more willing to share information."
Illegal but hard to control
Researchers also found that the accuracy of securities analysts' financial forecasts diminished over time.
"Over time they have multiple interactions. It's not a one-time event. The analyst usually covers a company for a period of time and the CEO stays there," Even-Tov said.
For example, when a CEO was replaced by a new leader with a different name, analysts' forecasts became less accurate, supporting their theory that illegal information sharing takes place.
"That confirms results are driven by this commonality," Even-Tov said.
This kind of private information sharing is illegal, but hard to regulate, he noted. Chief executives are required under disclosure regulations to make public any information that's shared with an analyst.
"It's hard to enforce, there are no cameras in the different meetings that occur between analysts and CEOs," he said.
Megan CerulloMegan Cerullo is a New York-based reporter for CBS MoneyWatch covering small business, workplace, health care, consumer spending and personal finance topics. She regularly appears on CBS News streaming to discuss her reporting.
veryGood! (6212)
Related
- Ben Foster files to divorce Laura Prepon after 6 years, according to reports
- Police warn residents to stay indoors after extremely venomous green mamba snake escapes in the Netherlands
- AP Week in Pictures: North America
- Black Friday 2023 store hours: When do Walmart, Target, Costco, Best Buy open and close?
- Veterans face challenges starting small businesses but there are plenty of resources to help
- Militants with ties to the Islamic State group kill at least 14 farmers in an attack in east Congo
- Indian authorities release Kashmiri journalist Fahad Shah after 21 months in prison
- Lulus' Black Friday Sale 2023: Up to 70% Off Influencer-Approved Dresses, Bridal & More
- Biden, Harris participate in Veterans Day ceremony | The Excerpt
- Sam Hunt and Wife Hannah Lee Fowler Welcome Baby No. 2
Ranking
- Ex-Duke star Kyle Singler draws concern from basketball world over cryptic Instagram post
- Happy Thanksgiving with Adam Savage, Jane Curtin, and more!
- ‘Adopt an axolotl’ campaign launches in Mexico to save iconic species from pollution and trout
- Families of hostages not slated for release from Gaza during current truce face enduring nightmare
- Fantasy football buy low, sell high: 10 trade targets for Week 11
- Palestinian families rejoice over release of minors and women in wartime prisoner swap
- Canada, EU agree to new partnerships as Trudeau welcomes European leaders
- Jimmy Carter's last moments with Rosalynn Carter, his partner of almost eight decades
Recommendation
-
John Krasinski is People's Sexiest Man Alive. What that says about us.
-
These artificial intelligence (AI) stocks are better buys than Nvidia
-
Gwyneth Paltrow talks menopause and perimenopause: 'It's nothing to be hidden'
-
The second installment of Sri Lanka’s bailout was delayed. The country hopes it’s coming in December
-
Vikings' Camryn Bynum celebrates game-winning interception with Raygun dance
-
Aaron Rodgers' accelerated recovery: medical experts weigh in on the pace, risks after injury
-
Paris Hilton announces the arrival of a baby daughter, London
-
Man arrested in fatal stabbing near Denver homeless shelters, encampment