Beyond Accuracy: How Analyst Site Visits Boost Precision of Management Range Guidance

Abstract

We investigate the effect of analysts' corporate site visits on the precision of management earnings range guidance using a unique dataset in China from 2012 to 2020. We find that more frequent analyst site visits before the release of management range guidance could lead to more precise earnings forecast, which is against the social transmission bias argument. Investigating the underlying mechanisms, this positive effect of analyst site visits is stronger for firms with higher information uncertainty and lower information processing capacity, which is in line with the managerial learning hypothesis that firm managers benefit from learning information from financial analysts. We find little empirical support for the organizational impression management explanation that managers proactively release more precise forecasts to impress investors.

Keywords: Analyst site visits, Management range guidance, Managerial learning, Organizational impression management, Social transmission bias