Ties That Bind: The Value of Professional Connections to Sell-Side Analysts

Management Science, Forthcoming

67 Pages Posted: 13 Jun 2019 Last revised: 30 Jul 2019

See all articles by Daniel Bradley

Daniel Bradley

University of South Florida

Sinan Gokkaya

Department of Finance, Ohio University

Xi Liu

Miami University of Ohio - Richard T. Farmer School of Business Administration

Date Written: May 22, 2019

Abstract

We examine professional connections among executives and analysts formed through overlapping historical employment. Analysts with professional connections to coverage firms have more accurate earnings forecasts, and issue more informative buy and sell recommendations. These analysts are more likely to participate, be chosen first, and ask more questions during earnings conference calls and analyst/investor days. Homophily based on gender, age and ethnicity is orthogonal to professional connections. Brokers attract greater trade commissions on stocks covered by connected analysts. Firms benefit through securing research coverage and invitations to broker-hosted investor conferences emulating from these connections.

Keywords: analyst forecasts, analyst recommendations, all-star analysts, professional networks, professional connections, capital market relationships, management access, homophily, analyst coverage, Regulation FD, broker commissions, earnings conference calls, analyst/investor days, broker hosted conferences

JEL Classification: G10, G11, G20, G23, G24

Suggested Citation

Bradley, Daniel and Gokkaya, Sinan and Liu, Xi, Ties That Bind: The Value of Professional Connections to Sell-Side Analysts (May 22, 2019). Management Science, Forthcoming. Available at SSRN: https://ssrn.com/abstract=3392388 or http://dx.doi.org/10.2139/ssrn.3392388

Daniel Bradley (Contact Author)

University of South Florida ( email )

Tampa, FL 33620
United States

Sinan Gokkaya

Department of Finance, Ohio University ( email )

207 Muck College of Business
Athens, OH 45701
United States

HOME PAGE: http://business.ohio.edu/about/faculty-staff/gokkaya-sinan/

Xi Liu

Miami University of Ohio - Richard T. Farmer School of Business Administration ( email )

Oxford, OH 45056
United States

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