Analyst Following Along the Supply Chain

45 Pages Posted: 18 Mar 2014

See all articles by Yuyan Guan

Yuyan Guan

City University of Hong Kong - College of Business

M.H. Franco Wong

University of Toronto - Rotman School of Management

Yue Zhang

Lingnan University

Date Written: March 17, 2014


We document that the likelihood of an analyst following a supplier-customer firm pair increases with the strength of the economic ties along the supply chain, as measured by the percent of the supplier’s sales to the customer. Analysts who follow a covered firm’s customer provide more accurate earnings forecasts for the supplier firm than analysts who do not. The greater forecast accuracy attributed to following a supplier’s customer is as large as the effect of following the supplier’s industry peers. While both types of analysts respond to and incorporate the earnings news from the customer firm into their revision of the supplier’s earnings forecasts, we find no evidence that analysts who follow the supplier-customer pair do so at a greater extent than their counterparts. However, these supplier-customer analysts exhibit a larger improvement in their forecast accuracy for the supplier subsequent to the customer’s earnings announcements, when compared to other analysts. Overall, the evidence suggests that supplier-customer analysts benefit from the informational complementarities along the supply chain and improve their forecast accuracy as a result.

Keywords: Supply Chain, Information Transfers, Analyst Following, Forecast Revisions, Forecast Accuracy

JEL Classification: D80, G14, M41

Suggested Citation

Guan, Yuyan and Wong, M.H. Franco and Zhang, Yue, Analyst Following Along the Supply Chain (March 17, 2014). INSEAD Working Paper No. 2014/21/ACC. Available at SSRN: or

Yuyan Guan

City University of Hong Kong - College of Business ( email )

83 Tat Chee Avenue
Hong Kong
852-34427136 (Phone)

M.H. Franco Wong (Contact Author)

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6
416-946-0729 (Phone)


Yue Zhang

Lingnan University ( email )

8 Castle Peak Road, Fu Tei
Hong Kong
852-26168164 (Phone)

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