PhD Dissertation Defense, Alexandre Madelaine, Accounting and Management Control

Congratulations to Dr Alexandre Madelaine, Accounting and Management Control, who successfully defended his doctoral dissertation at HEC Paris on June 6, 2023. Alexandre has accepted a position as Assistant Professor at Erasmus University - Rotterdam School of Management. 

Specialization: Accounting and Management Control

Topic: Nature and Implications of Equity Research Disclosed by Professional Investors 

Supervisor: Luc Paugam, Associate Professor, HEC Paris 

Jury Members:

• Beatriz García Osma, Professor, Universidad Carlos III de Madrid 
• Ole-Kristian Hope, Professor, University of Toronto (Rotman School of Management) 
• Peter Fiechter, Professor, University of Neuchatel (Institute of Financial Analysis) 
• Hervé Stolowy, Professor, HEC Paris 
• Luc Paugam, Associate Professor, Supervisor, HEC Paris

Abstract:

Professional investors advertise some of their investment ideas to other investors at investment conferences, on social media, or on their own website. In doing so, they disseminate various arguments and estimates to support their stock recommendations. In this thesis, I document the nature of professional investors’ equity research and examine the economic implications by particularly focusing on the unique role of target prices. In the first essay, I study whether the stock ownership of fund managers improves or impairs the informativeness of their equity research disclosed at investment conferences. Overall, I find that fund managers’ ownership improves the informativeness of their equity research. However, as fund managers’ incentives are uncertain and they sometimes trade against their own stock recommendations and target prices, investors learn and discount their equity research. In the second and third essays, I restrict my analysis to equity research disclosed by activist short sellers. In the second essay, I examine activist short sellers’ target prices and find that they are pessimistically biased, but informative, as they predict future returns in various windows. Target prices are informative, as activist short sellers have reputation concerns and target prices are summary statistics of their investment theses. Finally, I find that including target prices accelerates price discovery, that activist short sellers exhibit differential abilities to forecast stock prices, and that retail investors seem not to understand the informativeness of activist short sellers’ target prices. In the third essay, I investigate how earnings announcements are critical events for activist short sellers and attacked firms. On the one hand, I find that activist short sellers use investors’ fixation on earnings and increase their Twitter activity at earnings announcements. On the other hand, I provide evidence that attacked firms manage earnings to deter short sellers from disclosing allegations and reclaim the control of the investment narrative surrounding their stock.

Keywords: Professional investors, Stock recommendations, Target prices, Short Selling, Narratives, Stock Ownership.

Read Alexandre's article on Knowlegde@HEC "Should You Listen to the Wall Street Gurus?"

Learn more about Alexandre on LinkedIn.