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Learning by doing or catering: Firm-specific experience and analyst forecast accuracy

Author

Listed:
  • Ji, Xu
  • Wu, Shanhui
  • Dong, Yan
  • Yang, Xiaoqi

Abstract

This article explores catering behavior among security analysts by examining how firm-specific experience impacts forecast accuracy. Using analyst forecasts on listed companies in China from 2014 to 2018, we find that firm-specific experience significantly reduces analyst forecast accuracy, which indicates the existence of catering behavior. Heterogeneity analysis reveals that catering behavior primarily exists for analysts employed by large brokerage firms or who issue forecasts for large companies. Further analysis shows that catering behavior is more prevalent when analysts make forecasts for SOEs. These findings suggest multi-faced implications of firm-specific experience and call for better regulations on refraining analysts' catering behavior.

Suggested Citation

  • Ji, Xu & Wu, Shanhui & Dong, Yan & Yang, Xiaoqi, 2024. "Learning by doing or catering: Firm-specific experience and analyst forecast accuracy," Emerging Markets Review, Elsevier, vol. 60(C).
    • Handle: RePEc:eee:ememar:v:60:y:2024:i:c:s1566014124000281
    DOI: 10.1016/j.ememar.2024.101133
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    More about this item

    Keywords

    Catering; Learning by doing; Firm-specific experience; Analyst forecast accuracy; SOEs;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • J44 - Labor and Demographic Economics - - Particular Labor Markets - - - Professional Labor Markets and Occupations

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