Industry Knowledge and School Tie Spillover
53 Pages Posted: 25 Mar 2020
Date Written: February 28, 2020
In this paper, we examine the spillover effect of school ties. Analysts who have direct school ties with at least one firm in an industry make more frequent and more accurate forecasts, as well as more profitable recommendations on other firms in the same industry where they do not have direct school ties, suggesting that analysts acquire both firm-specific and industry-wide information through school ties. This spillover effect persists after enactment of Regulation Fair Disclosure. The effect is valuable enough to affect analysts’ coverage assignments and their likelihood to be named all-stars. Thus, benefits from school ties would be understated without considering the spillover effect; furthermore, we would have inferred incorrectly that school-tie analysts no longer enjoy information advantage through private access after Reg FD.
Keywords: Financial Analysts, School Ties, Industry Information, Forecast Accuracy, Analyst Recommendations, Regulation Fair Disclosure
JEL Classification: G14, G17, G18
Suggested Citation: Suggested Citation