Global Sales Network and Analyst Forecasts

54 Pages Posted: 28 Jun 2023

See all articles by John (Jianqiu) Bai

John (Jianqiu) Bai

Northeastern University - D’Amore-McKim School of Business

Zhaoyang Gu

Chinese University of Hong Kong - School of Accountancy

Chi Wan

University of Massachusetts Boston - Department of Accounting and Finance

Chi Zhang

University of Massachusetts Lowell

Date Written: June 27, 2023

Abstract

In this paper, we use an analyst’s coverage portfolio as the unit of analysis and argue that the linkage among the portfolio firms can provide useful information for analyst forecasts at the portfolio level. In particular, the geographic overlap in the portfolio firms’ global sales network (GSN) can generate important information spillover within the portfolio and create synergies in an analyst’s information production. Based on several measures of GSN similarity from textual analysis and machine learning algorithms, we find that greater GSN similarity of an analyst’s portfolio is associated with more frequent and more accurate sales forecasts. Further, greater GSN similarity is associated with more accurate earnings forecasts, especially when portfolio firms have high operating and financial leverages and when the earnings forecasts are accompanied by sales forecasts. Additional analyses corroborate analysts’ learning from portfolio firms’ earnings surprises when they are closely related through GSN.

Keywords: Analyst forecasts, sales network, machine learning

Suggested Citation

Bai, John (Jianqiu) and Gu, Zhaoyang and Wan, Chi and Zhang, Chi, Global Sales Network and Analyst Forecasts (June 27, 2023). Northeastern U. D’Amore-McKim School of Business Research Paper No. 4492981, Available at SSRN: https://ssrn.com/abstract=4492981 or http://dx.doi.org/10.2139/ssrn.4492981

John (Jianqiu) Bai

Northeastern University - D’Amore-McKim School of Business ( email )

360 Huntington Ave.
Boston, MA 02115
United States

Zhaoyang Gu (Contact Author)

Chinese University of Hong Kong - School of Accountancy ( email )

Shatin, N.T.
Hong Kong

Chi Wan

University of Massachusetts Boston - Department of Accounting and Finance ( email )

Boston, MA 02125
United States

Chi Zhang

University of Massachusetts Lowell ( email )

Pulichino Tong Building
Manning School of Business
Lowell, MA 01854
United States

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