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Analyst talent, information, and insider trading

Chongyu Dang, Stephen Foerster, Li, Zhichuan (Frank) and Zhenyang Tang

Journal of Corporate Finance, 2021, vol. 67, issue C

Abstract: We examine 1984–2018 data and show that the talent or ability of sell-side financial analysts affects a covered firm's information environment—more so than the simple number of analysts covering a firm. We find that while analysts in general produce market and industry-level information, high-ability analysts contribute more firm-specific information. Firms covered by high-ability analysts experience significantly less insider trading prior to positive earnings news. Results only reside in opportunistic (not routine) trades. When an analyst initiates (terminates) coverage we find decreased (increased) subsequent insider trading. Both changes are primarily driven by analyst talent. Analyst ability also negatively relates to insider trading profitability.

Keywords: Analyst talent; Information asymmetry; Insider trading; Sell-side financial analyst; Earnings announcements (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:67:y:2021:i:c:s0929119920302479

DOI: 10.1016/j.jcorpfin.2020.101803

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