Industry Knowledge and School Tie Spillover

53 Pages Posted: 25 Mar 2020

See all articles by Sheng‐Syan Chen

Sheng‐Syan Chen

National Chengchi University

Chuan-Yang Hwang

Nanyang Technological University (NTU)

Chen-Chieh Liao

National Chengchi University (NCCU) - Department of Finance

Chin-Te Yu

HSBC Global Asset Management

Date Written: February 28, 2020

Abstract

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

Chen, Sheng-Syan and Hwang, Chuan-Yang and Liao, Chen-Chieh and Yu, Chin-Te, Industry Knowledge and School Tie Spillover (February 28, 2020). 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 Technological University (NTU) ( 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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