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Peer Effects among Financial Analysts

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  • Truc (Peter) Thuc Do
  • Huai Zhang

Abstract

We hypothesize that the arrival of star analysts improves the performance of incumbent financial analysts, while the departure of star analysts has the opposite effect. Our results consistent with this hypothesis are concentrated primarily in the tests related to star arrivals. Our findings are robust to an instrumental variable approach and a falsification test. In addition, we hypothesize that the impact of the arrival/departure of star analysts is more pronounced when the star analyst covers the same industry as the incumbents (especially for industries with high uncertainty), when the star analyst is more established, when the incumbent analysts are less experienced, and when the brokerage house has fewer existing star analysts. Overall, our paper offers evidence of peer effects among financial analysts, mainly through the arrival of star analysts. Influence des pairs chez les analystes financiers Les auteurs posent l’hypothèse que l’arrivée d’analystes vedettes améliore la performance des analystes financiers en place, alors que le départ d’analystes vedettes a l’effet inverse. Les résultats de l’étude confirmant cette hypothèse se concentrent principalement dans les tests relatifs à l’arrivée d’analystes vedettes. Les constatations des auteurs résistent à une approche faisant appel à des variables instrumentales et à l’application d’un test de falsification. Les auteurs posent, de plus, l’hypothèse que l’incidence de l’arrivée ou du départ d’analystes vedettes est plus marquée lorsque l’analyste vedette s’intéresse au même secteur d’activité que les analystes en place (en particulier dans le cas des secteurs auxquels est associé un degré élevé d’incertitude), lorsque l’analyste vedette est un analyste mieux établi, lorsque les analystes en place sont moins expérimentés et lorsque la maison de courtage compte moins d’analystes vedettes. Dans l’ensemble, les données tirées de l’étude confirment l’influence des pairs chez les analystes financiers, qui se concrétise principalement lors de l’arrivée d’analystes vedettes.

Suggested Citation

  • Truc (Peter) Thuc Do & Huai Zhang, 2020. "Peer Effects among Financial Analysts," Contemporary Accounting Research, John Wiley & Sons, vol. 37(1), pages 358-391, March.
    • Handle: RePEc:wly:coacre:v:37:y:2020:i:1:p:358-391
    DOI: 10.1111/1911-3846.12523
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    2. Hope, Ole-Kristian & Su, Xijiang, 2021. "Peer-level analyst transitions," Journal of Corporate Finance, Elsevier, vol. 70(C).
    3. Anderson, Christopher W. & Babajide Wintoki, M. & Xi, Yaoyi, 2024. "CFO social capital, liquidity management, and the market value of cash✰," Journal of Banking & Finance, Elsevier, vol. 163(C).
    4. Jannati, Sima, 2024. "The ripple effect of all-star females: Knowledge spillover and improved analyst performance," Journal of Empirical Finance, Elsevier, vol. 77(C).
    5. Pan, Hunghua & Liao, Yi-Ping & Yu, Chen-Chiao, 2024. "Monitoring by busy compensation committee members," International Review of Economics & Finance, Elsevier, vol. 89(PA), pages 1557-1568.
    6. 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).
    7. Chen, Haosi (Chelsea) & Puckett, Andy, 2023. "Do Hedge Funds Value Sell-Side Analysts Differently?," Journal of Banking & Finance, Elsevier, vol. 154(C).
    8. 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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