Sociopolitical dynamics in relations between top managers and security analysts: Favor rendering, reciprocity, and analyst stock recommendations

We examine how the disclosure of negative firm information may prompt top execu-tives to render personal and professional favors for security analysts, who may recip-rocate by rating firms relatively positively. We further examine how negative ratings may prompt executive negative reciprocity toward an analyst and how such retaliation may deter other analysts ’ negative ratings. Because analyst recommendations influ-ence investor behavior, firm reputation, and access to capital, our theory and support-ive findings suggest that corporate leaders enhance and perpetuate external support for their firms via social influence processes that develop and maintain social ex-change relations with a key type of external constituent. A primary responsibility of top executives is to maintain the support of key external constituents for their firms (Hambrick, Finkelstein, & Mooney, 2005; Mintzberg, 1973, 1983). Yet, the academic literature on corporate governance and strategic leadership has devoted surprisingly little attention to the behavioral mechanisms by which executives influence external constituents. Most research in this literature has examined how executives exert influence over internal constituents of a firm, such as corporate board members, in the process of for-mulating or implementing strategy (for reviews, se