When Do Associate Analysts Matter?

53 Pages Posted: 8 Mar 2018 Last revised: 9 Jun 2021

See all articles by Menghai Gao

Menghai Gao

George Washington University

Yuan Ji

The Hong Kong Polytechnic University

Oded Rozenbaum

George Washington University - School of Business

Date Written: February 21, 2019

Abstract

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

Gao, Menghai and Ji, Yuan and Rozenbaum, Oded, When Do Associate Analysts Matter? (February 21, 2019). Available at SSRN: https://ssrn.com/abstract=3127930 or http://dx.doi.org/10.2139/ssrn.3127930

Menghai Gao

George Washington University ( email )

Washington, DC 20052
United States

Yuan Ji

The Hong Kong Polytechnic University ( email )

Hung Hom
Kowloon, Hong Kong
Hong Kong

Oded Rozenbaum (Contact Author)

George Washington University - School of Business ( email )

Washington, DC 20052
United States
202-994-5992 (Phone)

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