Monday, February 4, 2013

The Role of Analysts in Intra-Industry Information Transfer

HILARY Gilles, SHEN Rui
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The Accounting Review 88, 4 (2013) 1265-1287

When a firm issues a management forecast, analysts who have observed more forecasts from this firm since covering it (i.e., have more MF-experience) subsequently improve their own accuracy more and provide timelier earnings forecasts for other (non–issuing) firms in the same industry. We also find that, subsequent to a management forecast, investors are more responsive to forecast revisions for non‐issuing firms made by analysts with more MF-experience. Further tests suggest that our results are not explained by endogeneity in firm coverage.