Sell-Side Analysts as Social Intermediaries

Posted: 25 Apr 2023 Last revised: 13 Sep 2023

See all articles by Crawford Spence

Crawford Spence

Concordia University

Guangyu Li

King’s College London - King's Business School

Zhong Chen

King's Business School, King's College London

Date Written: April 3, 2023

Abstract

This qualitative study explores the work practices of sell-side analysts and in what ways sell-side analysts support investors and other actors in capital markets, with a focus on relational aspects. Adopting Granovetter’s notion that economic actions are embedded in social relations and drawing on interviews with various practitioners, we illustrate how analyst work is facilitated by social ties with other actors in the investment chain. We find that sell-side analysts are expected to fulfil relational demands from institutional investors and other actors that go beyond mere information provision. In response to these demands, sell-side analysts actively form, manage, and broker social ties. As such, they exert influence on investors and other actors through a social infrastructure that they build and carefully maintain. Our study suggests that, through relational mechanisms, sell-side analysts reduce the costs of identifying, maintaining, and leveraging social ties for investors and other actors in capital markets. In addition, we reveal that social ties can also constrain analyst work by distorting the evaluative criteria of successful analysts, which in turn further entrench existing social and informational asymmetries. This perspective broadens our understanding of sell-side analysts as social, rather than solely information, intermediaries.

Keywords: Sell-side analysts, social ties, social interactions, investment decisions, social intermediaries, social asymmetry, information asymmetry

Suggested Citation

Spence, Crawford and Li, Guangyu and Chen, Zhong, Sell-Side Analysts as Social Intermediaries (April 3, 2023). Available at SSRN: https://ssrn.com/abstract=4412326

Crawford Spence

Concordia University ( email )

1455 de Maisonneuve Blvd. W.
Montreal, Quebec H3G 1M8
Canada

Guangyu Li (Contact Author)

King’s College London - King's Business School ( email )

Bush House, 30 Aldwych
London, WC2B 4BG
United Kingdom

Zhong Chen

King's Business School, King's College London ( email )

Bush House
London, WC2B 4BG
United Kingdom

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