Cross-Industry Information Sharing among Colleagues and Analyst Research

70 Pages Posted: 7 Jan 2020 Last revised: 21 Jan 2021

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

We identify a specific organizational resource in brokerage houses—information sharing among analyst colleagues who cover economically related industries along a supply chain. We hypothesize that this resource benefits analyst research and allows analysts to have a higher level of industry specialization. The impact of this resource depends on colleagues’ information complementarity, which we measure using the level of economic connection between an analyst’s industry and her colleagues’ industries. We perform various empirical analyses to control for brokerage selection effects and find evidence consistent with our predictions. Specifically, we find that analysts with colleagues who are more economically connected have higher earnings forecast accuracy, stock recommendation profitability, and investor recognition, and that analysts and highly connected colleagues tend to issue revision reports contemporaneously. We further show that colleagues’ coverage of downstream (upstream) industries are positively related to the accuracy of only the analyst’s revenue (expense) forecasts. Last, we find that information sharing among colleagues allows analysts, especially less capable ones, to cover a more specialized research portfolio. Overall, our findings align with the theory of the firm that a firm’s organizational structures contribute to employee performance and specialization.

Keywords: financial analyst, information sharing, economically connected industries, supply chain, industry specialization, coverage decision, forecast accuracy, recommendation profitability, All-Star

JEL Classification: D23, G29, L14, M14, M40, M41

Suggested Citation

Huang, Allen and Lin, An-Ping and Zang, Amy, Cross-Industry Information Sharing among Colleagues and Analyst Research (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

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

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