The Effect of Star Analyst Tournaments on Firms' Information Environment

Aharoni, Gil; Shemesh, Joshua; Zapatero, Fernando

doi:10.2139/ssrn.2427567

The Effect of Star Analyst Tournaments on Firms' Information Environment

Marshall School of Business Working Paper No. FBE 05.14

66 Pages Posted: 22 Apr 2014 Last revised: 2 Sep 2016

See all articles by Gil Aharoni

Gil Aharoni

University of Melbourne; Financial Research Network (FIRN)

Joshua Shemesh

Monash University - Department of Banking and Finance; Financial Research Network (FIRN)

Fernando Zapatero

Questrom School of Business, Boston University

Date Written: August 26, 2016

Abstract

Star analysts typically cover 10 to 15 stocks. In half of the stocks they cover, they cross paths with other stars (battleground stocks). We show that being the most accurate star in battleground stocks plays a key role in the annual rankings from Institutional Investor magazine. Star analysts respond to this tournament by producing more accurate earnings forecasts in battleground stocks than in other stocks they cover. We explore several alternative explanations and find that they cannot account for the higher accuracy in battleground stocks. Head-to-head competition between star analysts plays a key role in a firm’s information environment.

Keywords: Star Analysts, Strategic Announcements, Forecast Error

JEL Classification: G20, G24

Suggested Citation: Suggested Citation

Aharoni, Gil and Shemesh, Joshua and Zapatero, Fernando, The Effect of Star Analyst Tournaments on Firms' Information Environment (August 26, 2016). Marshall School of Business Working Paper No. FBE 05.14. Available at SSRN: https://ssrn.com/abstract=2427567 or http://dx.doi.org/10.2139/ssrn.2427567