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Cater to Thy Client: Analyst Responsiveness to Institutional Investor Attention

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  • Peng-Chia Chiu

    (School of Management and Economics, CUHK Business School, The Chinese University of Hong Kong, Shenzhen, China)

  • Ben Lourie

    (University of California, Irvine, California 92697)

  • Alexander Nekrasov

    (University of Illinois at Chicago, Chicago, Illinois 60607)

  • Siew Hong Teoh

    (University of California, Irvine, California 92697)

Abstract

We study how institutional investor attention to a firm affects the timeliness of analysts’ forecasts for that firm. We measure abnormal institutional attention (AIA) using Bloomberg news search activity for the firm on earnings announcement days. We find that analysts issue more timely forecasts when AIA is high on the earnings announcement day. Analyst responsiveness to AIA is stronger when analysts have more resources and experience and weaker when the AIA of other covered firms is high. Analysts who respond more to AIA are more likely to be named all-star analysts and less likely to be demoted to a smaller brokerage. We address endogeneity concerns using a measure of expected AIA that is unaffected by concurrent information. Our findings suggest that responsiveness to institutional attention influences the production of analyst research and analysts’ career outcomes.

Suggested Citation

  • Peng-Chia Chiu & Ben Lourie & Alexander Nekrasov & Siew Hong Teoh, 2021. "Cater to Thy Client: Analyst Responsiveness to Institutional Investor Attention," Management Science, INFORMS, vol. 67(12), pages 7455-7471, December.
    • Handle: RePEc:inm:ormnsc:v:67:y:2021:i:12:p:7455-7471
    DOI: 10.1287/mnsc.2020.3836
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    References listed on IDEAS

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