When Do Associate Analysts Matter?
53 Pages Posted: 8 Mar 2018 Last revised: 9 Jun 2021
Date Written: February 21, 2019
While extant literature investigates the role of sell-side equity analysts in capital markets, most
studies do not consider that sell-side equity analysts often work in hierarchical teams. Lead
analysts manage a team of associate and junior analysts who participate in the team’s tasks.
Building on the delegation theory in the management literature, we hypothesize and find a
division of labor between lead and associate analysts, where lead analysts are more likely to
delegate tasks that are (1) less significant and (2) simpler, and when (3) the workload of the lead
analyst increases, and (4) the associate analyst is more competent. Our results further suggest that
associate analysts play a significant role in forecasting. In contrast, lead analysts are the main
contributors to the qualitative aspects of analyst reports and are more likely to participate in
earnings conference calls. Overall, our study documents the significant role of associate analysts
in forecasting and the division of labor between lead and associate analysts.
Keywords: Analysts; performance; teams; earnings forecasts
JEL Classification: G10; G24; G30; M10; M40; M41
Suggested Citation: Suggested Citation