Cater to Thy Client: Analyst Responsiveness to Institutional Investor Attention
Management Science, Forthcoming
48 Pages Posted: 7 Sep 2019 Last revised: 21 Aug 2020
Date Written: August 10, 2020
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: Suggested Citation