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Information Sharing and Spillovers: Evidence from Financial Analysts

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  • Byoung-Hyoun Hwang

    (Dyson School of Applied Economics and Management, Cornell SC Johnson College of Business, Cornell University, Ithaca, New York 14853; and Korea University Business School, Korea University, Anam-dong, Seongbuk-gu, Seoul 136-701, Korea)

  • José María Liberti

    (Kellogg School of Management, Northwestern University, Evanston, Illinois 60208; and Kellstadt Graduate School of Business, DePaul University, Chicago, Illinois 60604)

  • Jason Sturgess

    (School of Economics and Finance, Queen Mary University of London, London E1 4NS, United Kingdom)

Abstract

We study how information sharing within an organization affects individual performance. We look at situations in which the same analyst, while working at the same broker, covers multiple mergers and acquisitions (M&As), in particular the acquirer prior to the M&A and the merged firm thereafter. We find that earnings forecasts for the merged firm are significantly more accurate when the analyst has a colleague (working at the same broker) covering the target prior to the M&A. This holds particularly true if acquirer analysts and target analysts reside in the same locale, if they are part of a smaller team, and if the target analyst is of higher quality. Our findings highlight the importance of information spillovers on individual performance in knowledge-based industries.

Suggested Citation

  • Byoung-Hyoun Hwang & José María Liberti & Jason Sturgess, 2019. "Information Sharing and Spillovers: Evidence from Financial Analysts," Management Science, INFORMS, vol. 65(8), pages 3624-3636, August.
    • Handle: RePEc:inm:ormnsc:v:65:y:2019:i:8:p:3624-3636
    DOI: 10.1287/mnsc.2017.2986
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    8. Huang, Allen H. & Lin, An-Ping & Zang, Amy Y., 2022. "Cross-industry information sharing among colleagues and analyst research," Journal of Accounting and Economics, Elsevier, vol. 74(1).
    9. Chen, Chen & Wang, Tao & Jia, Ximeng, 2023. "Short-termism in financial decision-making: Uncovering the influence of managerial myopia on corporate financial asset allocation through MD&A textual analysis," International Review of Financial Analysis, Elsevier, vol. 90(C).
    10. Li, Yi & Zhang, Wei & Wang, Pengfei, 2021. "Working online or offline: Which is more effective?," Research in International Business and Finance, Elsevier, vol. 58(C).
    11. Tim Martens & Christoph J. Sextroh, 2021. "Analyst Coverage Overlaps and Interfirm Information Spillovers," Journal of Accounting Research, Wiley Blackwell, vol. 59(4), pages 1425-1480, September.
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