How Do Star Analyst Rankings Influence Analysts’ Performance?
52 Pages Posted: 8 Mar 2020 Last revised: 3 Aug 2020
Date Written: May 15, 2020
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
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