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Ties That Bind: The Value of Professional Connections to Sell-Side Analysts

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  • Daniel Bradley

    (Department of Finance, University of South Florida, Tampa, Florida 33620)

  • Sinan Gokkaya

    (Department of Finance, Ohio University, Athens, Ohio 45701)

  • Xi Liu

    (Department of Finance, Miami University, Oxford, Ohio 45056)

Abstract

We examine professional connections among executives and analysts formed through overlapping historical employment. Analysts with professional connections to coverage firms have more accurate earnings forecasts and issue more informative buy and sell recommendations. These analysts are more likely to participate, be chosen first, and ask more questions during earnings conference calls and analyst/investor days. Homophily based on gender, age, and ethnicity is orthogonal to professional connections. Brokers attract greater trade commissions on stocks covered by connected analysts. Firms benefit through securing research coverage and invitations to broker-hosted investor conferences emulating from these connections.

Suggested Citation

  • Daniel Bradley & Sinan Gokkaya & Xi Liu, 2020. "Ties That Bind: The Value of Professional Connections to Sell-Side Analysts," Management Science, INFORMS, vol. 66(9), pages 4118-4151, September.
    • Handle: RePEc:inm:ormnsc:v:66:y:2020:i:9:p:4118-4151
    DOI: 10.287/mnsc.2019.3391
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    7. Chen, Chen & Dou, Ying & Kuang, Yu Flora & Naiker, Vic, 2023. "Do professional ties enhance board seat prospects of independent directors with tainted reputations?," Journal of Banking & Finance, Elsevier, vol. 154(C).

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