Cross-Industry Information Sharing and Analyst Performance

64 Pages Posted: 7 Jan 2020

See all articles by Allen Huang

Allen Huang

Hong Kong University of Science and Technology - Department of Accounting

An-Ping Lin

Singapore Management University - School of Accountancy

Amy Zang

Hong Kong University of Science and Technology - Department of Accounting

Date Written: December 12, 2019

Abstract

This study shows that analyst research benefits from the sharing of information about economically connected industries among colleagues. Measuring the intensity of potential information sharing with the level of economic connection between an analyst’s industry and her colleagues’ industries, we find that it is positively correlated with an analyst’s earnings forecast accuracy, stock recommendation profitability, coverage breadth, and report frequency after controlling for other determinants including broker or analyst fixed effects. We also find that analysts are more likely to issue reports when highly connected colleagues produce information. We show that sharing information with colleagues covering downstream (upstream) industries benefits an analyst’s revenue (expense) forecasts, and that an analyst’s performance improves (deteriorates) after an economically connected colleague joins (departs) the brokerage firm. Cross-sectionally, information sharing benefits an analyst’s research more when her colleagues have higher research quality, and when she and her colleagues have stronger social ties. Finally, we find that investors recognize the benefits of information sharing: they react more strongly to research reports issued by analysts whose covered industries have a higher level of economic connection to those of colleagues, and are more likely to vote such analysts as All-Stars.

Keywords: financial analyst, information sharing, economically connected industries, forecast accuracy, recommendation profitability, social network, All-Star ranking

JEL Classification: G29, M14, M40, M41

Suggested Citation

Huang, Allen and Lin, An-Ping and Zang, Amy, Cross-Industry Information Sharing and Analyst Performance (December 12, 2019). Available at SSRN: https://ssrn.com/abstract=3502820 or http://dx.doi.org/10.2139/ssrn.3502820

Allen Huang (Contact Author)

Hong Kong University of Science and Technology - Department of Accounting ( email )

LSK Business School Building
HKUST
Clear Water Bay, Kowloon
Hong Kong
+852-23587559 (Phone)

HOME PAGE: http://www.AllenHuang.org

An-Ping Lin

Singapore Management University - School of Accountancy ( email )

60 Stamford Road
Singapore 178900
Singapore

Amy Zang

Hong Kong University of Science and Technology - Department of Accounting ( email )

LSK Business School Building
Clear Water Bay, Kowloon
Hong Kong
+852-23587561 (Phone)

HOME PAGE: http://www.AmyZang.org

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
69
Abstract Views
362
rank
347,828
PlumX Metrics