Paper #733

Title:

Security analysts as frame-makers

Authors:

Daniel Beunza Ibáñez and Raghu Garud

Date:

January 2004 (Revised: September 2005)

Abstract:

In this paper we explore the mechanisms that allow securities analysts to value companies in contexts of Knightian uncertainty, that is, in the face of information that is unclear, subject to unforeseeable contingencies or to multiple interpretations. We address this question with a grounded-theory analysis of the reports written on Amazon.com by securities analyst Henry Blodget and rival analysts during the years 1998-2000. Our core finding is that analysts' reports are structured by internally consistent associations that include categorizations, key metrics and analogies. We refer to these representations as calculative frames, and propose that analysts function as frame-makers - that is, as specialized intermediaries that help investors value uncertain stocks. We conclude by considering the implications of frame-making for the rise of new industry categories, analysts' accuracy, and the regulatory debate on analysts'independence.

Keywords:

Securities analysts, calculative frames, economic sociolgy

JEL codes:

L84, G24, G14

Area of Research:

Management and Organization Studies

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