Why Do Analysts Issue Long-Term Earnings Growth Forecasts? An Empirical Analysis

The authors examine analysts' motives to issue Long-Term earning Growth (LTG) forecasts. They find that analysts are more likely to issue LTG forecasts when their incentive to please managers is strong. In addition, analysts are more likely to choose firms that they are more optimistic about for LTG coverage. They find mixed evidence regarding whether analysts issue LTG forecasts to signal their ability or to meet investors' informational needs. Augmenting Ljungqvist et al (2006), they show that LTG forecasts are issued less likely to please managers, but more likely to meet investors' information needs in the presence of high institutional ownership.