How Do Star Analyst Rankings Influence Analysts’ Performance?

52 Pages Posted: 8 Mar 2020 Last revised: 3 Aug 2020

See all articles by Gerald J. Lobo

Gerald J. Lobo

University of Houston - C.T. Bauer College of Business

Yongxian Tan

University of Otago

Yadi Wen

Southwestern University of Finance and Economics (SWUFE)

Hailong Zhao

Southwestern University of Finance and Economics

Date Written: May 15, 2020

Abstract

We examine the impact of star analyst rankings on analysts’ forecast performance. To strengthen identification, we explore the exogenous variation in analysts’ incentives generated by the suspension of the New Fortune Star Analyst Contest in China. We find that the reduction in rankings-related incentives has a positive impact on analysts’ performance, as measured by forecast accuracy, market reaction to forecasts, and the likelihood of conducting site visits. The evidence is consistent with the view that star analyst rankings are largely popularity contests that induce analysts to allocate time and resources to attention grabbing and relationship building activities.

Keywords: Star Analyst Ranking; Popularity Contests; New Fortune Magazine; Earnings Forecasts

JEL Classification: G24; G17; J30

Suggested Citation

Lobo, Gerald J. and Tan, Yongxian and Wen, Yadi and Zhao, Hailong, How Do Star Analyst Rankings Influence Analysts’ Performance? (May 15, 2020). Available at SSRN: https://ssrn.com/abstract=3537330 or http://dx.doi.org/10.2139/ssrn.3537330

Gerald J. Lobo

University of Houston - C.T. Bauer College of Business ( email )

Houston, TX 77204-6021
United States
713-743-4838 (Phone)
713-743-4828 (Fax)

HOME PAGE: http://www.bauer.uh.edu/acct/acctprofile.asp?search=Gerald%20Lobo

Yongxian Tan (Contact Author)

University of Otago ( email )

P.O. Box 56
Dunedin, Otago 9010
New Zealand

Yadi Wen

Southwestern University of Finance and Economics (SWUFE) ( email )

55 Guanghuacun St,
Chengdu, Sichuan 610074
China

Hailong Zhao

Southwestern University of Finance and Economics ( email )

55 Guanghuacun St,
Chengdu, Sichuan 610074
China

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