The coverage assignments of financial analysts
Tristan Roger ()
Accounting and Business Research, 2018, vol. 48, issue 6, 651-673
Previous studies document that forecast accuracy impacts analyst career outcomes. This paper investigates the influence of forecast accuracy on coverage assignments. I show that brokerage houses reward accurate analysts by assigning them to high-profile firms and penalise analysts exhibiting poor accuracy by assigning them to smaller firms. The coverage of high-profile firms increases the potential for future compensation linked to investment banking and trading commissions. In addition, covering such firms increases analysts' recognition from buy-side investors, which, in turn, increases the likelihood of obtaining broker votes and votes for the Institutional Investor star ranking. Overall, my results indicate that high forecast accuracy leads to increased future compensation.
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