Cater to Thy Client: Analyst Responsiveness to Institutional Investor Attention

Management Science, Forthcoming

48 Pages Posted: 7 Sep 2019 Last revised: 21 Aug 2020

See all articles by Peng-Chia Chiu

Peng-Chia Chiu

The Chinese University of Hong Kong, Shenzhen

Ben Lourie

University of California, Irvine

Alexander Nekrasov

University of Illinois at Chicago

Siew Hong Teoh

University of California, Irvine - Accounting Area

Date Written: August 10, 2020

Abstract

We study how institutional investor attention to a firm affects the timeliness of analysts’ forecasts for that firm. We measure abnormal institutional attention (AIA) using Bloomberg news search activity for the firm on earnings announcement days. We find that analysts issue more timely forecasts when AIA is high on the earnings announcement day. Analyst responsiveness to AIA is stronger when analysts have more resources and experience and weaker when the AIA of other covered firms is high. Analysts who respond more to AIA are more likely to be named all-star analysts and less likely to be demoted to a smaller brokerage. We address endogeneity concerns using a measure of expected AIA that is unaffected by concurrent information. Our findings suggest that responsiveness to institutional attention influences the production of analyst research and analysts’ career outcomes.

Keywords: Institutional Investor Attention, Analyst Responsiveness, Analyst Timeliness

JEL Classification: M41, G24, G14, M40

Suggested Citation

Chiu, Peng-Chia and Lourie, Ben and Nekrasov, Alexander and Teoh, Siew Hong, Cater to Thy Client: Analyst Responsiveness to Institutional Investor Attention (August 10, 2020). Management Science, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3446418 or http://dx.doi.org/10.2139/ssrn.3446418

Peng-Chia Chiu

The Chinese University of Hong Kong, Shenzhen ( email )

Ben Lourie (Contact Author)

University of California, Irvine ( email )

Irvine, CA 92697-3125
United States

Alexander Nekrasov

University of Illinois at Chicago ( email )

1200 W Harrison St
Chicago, IL 60607
United States

HOME PAGE: http://business.uic.edu/profiles/alexander-nekrasov/

Siew Hong Teoh

University of California, Irvine - Accounting Area ( email )

Irvine, CA 92697-3125
United States

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