ビジネス＆財務ジャーナル

The focus of this paper is the relationship between regulatory settings and financial analysts’ performance, which is examined by studying the level of shareholder protection and the performance of financial analysts in two countries with different legal origins. By using a newly constructed index to measure shareholder protection, we are able to analyze how changes in shareholder protection over time can affect analysts’ performance. By comparing two countries with different legal traditions (the United Kingdom (UK) and Sweden), we are also able to assess whether the underlying legal origin is an influential factor. The results show that increased shareholder protection improves forecast accuracy in both the UK and Sweden, supporting the idea that stronger shareholder protection regulations improve analysts’ performance whether the legal context is rooted in common law or Scandinavian civil law tradition. The findings also indicate that strengthened shareholder protection decreases forecast dispersion in Sweden and forecast bias in the UK, further supporting the idea that stronger shareholder protection improves analysts’ performance even though the results differed across legal contexts. We did, however, find a substitution effect in both countries: Strengthened shareholder protection makes analysts’ services less valuable to investors, thus leading to a reduction in the number of analysts. Our main conclusion is that changes in shareholder protection affect the performance of analysts irrespective of the country’s legal origin, i.e. common law or Scandinavian civil law. However, legal origin seems to have an impact on the magnitude of analysts’ performance based on changes in shareholder protection.

According to empirical studies, there is a systematic pattern in the temporal behavior of asset returns and this is related to the business cycle. We propose a simple model that captures this behavior. This model is built around a state dependent preference structure where the state dependency is related to the business cycle. In this setting the volatility puzzle, the equity premium puzzle and mean-reversion appear to be indeed interrelated phenomena. A necessary condition for the three puzzles to be explained is that the state variable is negatively correlated with the market portfolio cum business cycle.