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Do Analysts Gain an Informational Advantage by Visiting Listed Companies?
Author(s) -
Han Bing,
Kong Dongmin,
Liu Shasha
Publication year - 2018
Publication title -
contemporary accounting research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.769
H-Index - 99
eISSN - 1911-3846
pISSN - 0823-9150
DOI - 10.1111/1911-3846.12363
Subject(s) - endogeneity , earnings , business , private information retrieval , face (sociological concept) , earnings management , accounting , economics , econometrics , computer science , social science , computer security , sociology
We examine the improvements in forecast accuracy that result from analysts' visits to listed companies. We find that company visits significantly enhance the accuracy of the analysts' earnings forecasts for those companies. The benefit from company visits is more pronounced for companies that are more neglected or less accessible and for brokerage firms that face less pressure for optimistic forecasts from buy‐side clients. Our results are robust and remain significant after controlling for endogeneity and selection bias. Overall, our findings show that private interactions with company management provide analysts with an informational advantage and suggest that company visits facilitate the mosaic approach to information acquisition.