Cater to Thy Client: Analyst Responsiveness to Institutional Investor Attention
Peng-Chia Chiu, Ben Lourie, Alexander Nekrasov, Siew Hong Teoh
Management Science · 2021 · Volume 67 · Issue 12
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. This paper was accepted by Brian Bushee, accounting.
Keywords
institutional investor attention, analyst responsiveness, analyst timeliness
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