Analysts’ Questions When Peers Are Listening

57 Pages Posted: 28 May 2021 Last revised: 12 Sep 2023

See all articles by Julia Haag

Julia Haag

LMU Munich School of Management

Christian Hofmann

Ludwig Maximilian University of Munich (LMU) - Faculty of Business Administration (Munich School of Management)

Alexander Paulus

LMU Munich School of Management

Nina Schwaiger

LMU Munich; TRR 266 Accounting for Transparency

Thorsten Sellhorn

Ludwig-Maximilians-Universitaet (LMU) Munich; TRR 266 Accounting for Transparency

Date Written: September 23, 2023

Abstract

We study analysts’ choice of distinct versus follow-up questions in earnings conference calls, and how it affects firms’ information environments. We argue that asking distinct questions, which go beyond the topics presented by management, benefits analysts by yielding more-informative answers, but also invites peers to free-ride on revealed information and poses the risk of alienating management, relative to follow-up questions. We find that analysts with higher ex-ante forecast accuracy ask less-distinct questions than less-accurate analysts. A mechanism analysis reveals that such less-distinct questions are less costly – in terms of reduced relative forecast accuracy and a higher likelihood of being excluded from the subsequent call. Consistent with deliberately safeguarding their information advantage, analysts ask less-distinct questions where competition is stronger, information uncertainty is lower, and private communication with management is less likely. Finally, we document that the distinctness of analysts’ questions is associated with the informativeness of managers’ answers and firms’ information environ-ments as perceived by capital market participants.

Keywords: financial analysts; conference calls; question phrasing; forecast accuracy; incentives

JEL Classification: G24, G29, M41

Suggested Citation

Haag, Julia and Hofmann, Christian and Paulus, Alexander and Schwaiger, Nina and Sellhorn, Thorsten, Analysts’ Questions When Peers Are Listening (September 23, 2023). TRR 266 Accounting for Transparency Working Paper Series No. 38, Available at SSRN: https://ssrn.com/abstract=3853869 or http://dx.doi.org/10.2139/ssrn.3853869

Julia Haag

LMU Munich School of Management ( email )

Geschwister-Scholl-Platz 1
Munich, DE Bavaria 80539
Germany

Christian Hofmann

Ludwig Maximilian University of Munich (LMU) - Faculty of Business Administration (Munich School of Management) ( email )

Kaulbachstr. 45
Munich, DE 80539
Germany

Alexander Paulus (Contact Author)

LMU Munich School of Management ( email )

Ludwigstr. 28 RG IV
Munich, DE 80539
Germany

Nina Schwaiger

LMU Munich ( email )

Geschwister-Scholl-Platz 1
Munich, DE Bavaria 80539
Germany

TRR 266 Accounting for Transparency ( email )

Warburger Straße 100
Paderborn, 33098
Germany

Thorsten Sellhorn

Ludwig-Maximilians-Universitaet (LMU) Munich ( email )

Ludwigstr. 28 RG IV
Munich, Bavaria 80539
Germany
+49(0)89-21806264 (Phone)
+49(0)89-21806327 (Fax)

HOME PAGE: http://www.rwp.bwl.uni-muenchen.de/personen/professoren/sellhorn/index.html

TRR 266 Accounting for Transparency ( email )

Warburger Straße 100
Paderborn, 33098
Germany

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