Do Connections with Buy-Side Analysts Inform Sell-Side Analyst Research?

52 Pages Posted: 12 Oct 2017 Last revised: 11 Apr 2018

See all articles by Gjergji Cici

Gjergji Cici

University of Kansas - School of Business

Philip B. Shane

College of William & Mary; Monash University; Monash University - Department of Accounting

Yanhua Sunny Sunny Yang

University of Connecticut - School of Business; University of Connecticut - School of Business

Date Written: February 14, 2018

Abstract

We hypothesize that connections with buy-side analysts provide a sell-side analyst with private information generated by the buy-side that enhances the quality of sell-side research. We proxy for these connections with the number of stocks at the intersection of stocks held in the portfolios of institutional investors and followed by the sell-side analyst. The larger this intersection, the more opportunities the sell-side analyst has to interact with institutional investors. We proxy for the research quality of the sell-side analyst with her earnings forecast accuracy. We find that such connections enhance the accuracy of earnings forecasts, but up to a point of diminishing returns. Additional tests rule out reverse causality and omitted variables as explanations for the association, and strengthen the inference that connections between sell- and buy-side analysts increase the flow of information and improve the quality of sell-side research output.

Keywords: sell-side analysts, buy-side analysts, institutional investors

JEL Classification: G14, G23, M41

Suggested Citation

Cici, Gjergji and Shane, Philip B. and Yang, Yanhua Sunny, Do Connections with Buy-Side Analysts Inform Sell-Side Analyst Research? (February 14, 2018). University of Connecticut School of Business Research Paper No. 17-12. Available at SSRN: https://ssrn.com/abstract=3051109 or http://dx.doi.org/10.2139/ssrn.3051109

Gjergji Cici (Contact Author)

University of Kansas - School of Business ( email )

Capitol Federal Hall
1654 Naismith Drive
Lawrence, KS 66045
United States
785-864-3873 (Phone)

HOME PAGE: http://business.ku.edu/gjergji-cici

Philip B. Shane

College of William & Mary ( email )

P.O. Box 8795
Williamsburg, VA 23185
United States

Monash University ( email )

23 Innovation Walk
Wellington Road
Clayton, Victoria 3800
Australia

Monash University - Department of Accounting ( email )

H3.43, Building H, Level 3
Monash University Caulfiled
Melbourne, VIC 3145
Australia

Yanhua Sunny Yang

University of Connecticut - School of Business ( email )

2100 Hillside Road
Storrs, CT 06269-1041
United States
8604864696 (Phone)
8604864838 (Fax)

HOME PAGE: http://www.business.uconn.edu/person/yanhua-sunny-yang/

University of Connecticut - School of Business ( email )

2100 Hillside Rd, Unti 1041A
Storrs, CT 06238
United States
8604864696 (Phone)

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