Analyst following along the supply chain

Yuyan Guan (), M. H. Franco Wong () and Yue Zhang ()
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Yuyan Guan: City University of Hong Kong
M. H. Franco Wong: INSEAD, Boulevard de Constance
Yue Zhang: City University of Hong Kong

Review of Accounting Studies, 2015, vol. 20, issue 1, No 7, 210-241

Abstract: Abstract We document that the likelihood of an analyst following a supplier–customer firm pair increases with the strength of the economic ties along the supply chain, as measured by the percentage of the supplier’s sales to the customer. Analysts who follow a covered firm’s customer provide more accurate earnings forecasts for the supplier firm than analysts who do not. While both types of analysts respond to and incorporate the earnings news from the customer firm into their revisions of the supplier’s earnings forecasts, supplier–customer analysts exhibit a larger improvement in their forecast accuracy for the supplier subsequent to the customer’s earnings announcements, when compared to other analysts. Overall, the evidence suggests that supplier–customer analysts benefit from the informational complementarities along the supply chain and improve their forecast accuracy as a result.

Keywords: Supply chain; Information transfers; Analyst following; Forecast revisions; Forecast accuracy; Customer momentum (search for similar items in EconPapers)
JEL-codes: D80 G14 M41 (search for similar items in EconPapers)
Date: 2015
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DOI: 10.1007/s11142-014-9295-6

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