Judgment Effects of Familiarity with an Analyst's Name

42 Pages Posted: 5 Feb 2013 Last revised: 10 Apr 2013

See all articles by Wei Chen

Wei Chen

UNSW Australia Business School, School of Accounting

Hun-Tong Tan

Nanyang Business School, Nanyang Technological University

Date Written: February 4, 2013

Abstract

We conduct an experiment with MBA students where we manipulate whether participants are exposed to an analyst’s name in Stage 1, and whether they are given a cue in Stage 2 about the particular analyst’s prior performance as an All-star analyst. We find that in the absence of a favorable performance cue about the analyst, mere exposure to the analyst’s name enhances perceived analyst credibility, which in turn influences the investors’ earnings estimates. This suggests a benefit to analysts in terms of building credibility merely through media exposure that cannot be explained by performance. In fact, a diagnostic cue such as the analyst’s high prior performance no longer matters to investors once they have prior exposure to the analyst’s name. We also show a cost of media exposure in that the analyst’s credibility takes a bigger hit for inaccurate forecasts.

Keywords: exposure effect, familiarity, All-Star analyst, analyst forecast error

JEL Classification: C91, M41

Suggested Citation

Chen, Wei and Tan, Hun-Tong, Judgment Effects of Familiarity with an Analyst's Name (February 4, 2013). Accounting, Organizations and Society, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2211849 or http://dx.doi.org/10.2139/ssrn.2211849

Wei Chen

UNSW Australia Business School, School of Accounting ( email )

Sydney, NSW 2052
Australia

Hun-Tong Tan (Contact Author)

Nanyang Business School, Nanyang Technological University ( email )

Singapore, 639798
Singapore
+65 6790 4819 (Phone)
+65 6793 7956 (Fax)

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