Analyst Industry Knowledge and School Tie Spillover

61 Pages Posted: 25 Mar 2020 Last revised: 31 Mar 2021

See all articles by Sheng‐Syan Chen

Sheng‐Syan Chen

National Chengchi University

Chuan-Yang Hwang

Nanyang Business School, Nanyang Technological University

Chen-Chieh Liao

National Chengchi University (NCCU) - Department of Finance

Chin-Te Yu

HSBC Global Asset Management

Date Written: February 28, 2021

Abstract

Relative to analysts without school ties, analysts with ties make more accurate forecasts and more profitable recommendations on non-tied firms in the same industry, suggesting that analysts acquire industry information through school ties. We conduct various tests to assess the relative importance of firm-specific vs. industry information reflected in connected analysts’ forecasts and recommendations. After Regulation Fair Disclosure, firm managers shift from privately disclosing firm-specific information to industry information, which is responsible for connected analysts’ continued (albeit smaller) information advantage. These results suggest selective disclosure of industry information is a legal gray area that deserves further regulatory attention.

Keywords: Financial Analysts, School Ties, Industry Information, Forecast Accuracy, Analyst Recommendations, Regulation Fair Disclosure

JEL Classification: G14, G17, G18

Suggested Citation

Chen, Sheng-Syan and Hwang, Chuan-Yang and Liao, Chen-Chieh and Yu, Chin-Te, Analyst Industry Knowledge and School Tie Spillover (February 28, 2021). Nanyang Business School Research Paper No. 20-02, Available at SSRN: https://ssrn.com/abstract=3545732 or http://dx.doi.org/10.2139/ssrn.3545732

Sheng-Syan Chen

National Chengchi University

No. 64, Sec. 2, ZhiNan Rd., Wenshan District
Taipei 116, 116
Taiwan

Chuan-Yang Hwang (Contact Author)

Nanyang Business School, Nanyang Technological University ( email )

Singapore, 639798
Singapore
65-67905003 (Phone)
65-6791-3697 (Fax)

Chen-Chieh Liao

National Chengchi University (NCCU) - Department of Finance ( email )

No. 64, Chih-Nan Road
Section 2
Wenshan, Taipei, 11623
Taiwan

Chin-Te Yu

HSBC Global Asset Management ( email )

78 St. James's Street
London, London SW1A 1EJ
United Kingdom

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