Can FinTech Competition Improve Sell-Side Research Quality?

The Accounting Review, Forthcoming

62 Pages Posted: 13 Feb 2017 Last revised: 3 Sep 2021

See all articles by Russell Jame

Russell Jame

University of Kentucky - Gatton College of Business and Economics

Stanimir Markov

University of Texas at Dallas - Naveen Jindal School of Management

Michael C. Wolfe

Oklahoma State University - Stillwater - Spears School of Business

Date Written: August 15, 2021

Abstract

We examine how increased competition stemming from an innovation in financial technology influences sell-side analyst research quality. We find that firms added to Estimize, an open platform that crowdsources short-term earnings forecasts, experience a pervasive and substantial reduction in consensus bias and a limited increase in consensus accuracy relative to matched control firms. Long-term forecasts and investment recommendations remain similarly biased, alleviating the concern that the documented reduction in bias is a response to broad economic forces. At the individual analyst level, we find that bias reduction is more pronounced among close-to-management analysts; and that more biased analysts respond by reducing their coverage of Estimize firms. The collective evidence suggests that competition from Estimize improves sell-side research quality by discouraging strategic bias.

Keywords: Analysts, Forecast Bias, FinTech, Crowdsourcing

JEL Classification: D83, G24, M41

Suggested Citation

Jame, Russell and Markov, Stanimir and Wolfe, Michael, Can FinTech Competition Improve Sell-Side Research Quality? (August 15, 2021). The Accounting Review, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2915817 or http://dx.doi.org/10.2139/ssrn.2915817

Russell Jame

University of Kentucky - Gatton College of Business and Economics ( email )

550 South Limestone
Lexington, KY 40506
United States

HOME PAGE: http://russelljame.com

Stanimir Markov (Contact Author)

University of Texas at Dallas - Naveen Jindal School of Management ( email )

P.O. Box 830688
Richardson, TX 75083-0688
United States
972 883 5166 (Phone)

Michael Wolfe

Oklahoma State University - Stillwater - Spears School of Business ( email )

201 Business
Stillwater, OK 74078-0555
United States

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