Do Analysts Gain an Informational Advantage by Visiting Listed Companies?
43 Pages Posted: 21 Aug 2017
Date Written: August 16, 2017
We examine the improvements to forecast accuracy that result from analysts’ visits to listed companies. We find that company visits significantly enhance the accuracy of the analysts’ earnings forecasts for those companies. The benefit from company visits is more pronounced for companies that are more neglected or less accessible and for brokerages firms that face less pressure for optimistic forecasts from buy-side clients. Our results are robust and remain significant after controlling for endogeneity and selection bias. Overall, our findings show that private interactions with company management provide analysts with an informational advantage and suggest that company visits facilitate the mosaic approach to information acquisition.
Keywords: Analyst Visit, Forecast Accuracy, Informational Advantage; Geography
JEL Classification: G11; G12
Suggested Citation: Suggested Citation