The Role of Analysts in Intra Industry Information

I investigate the role of analysts in improving the efficiency of intra-industry information transfer. The prior literature suggests that management forecasts convey information relevant to other firms in the same industry but that this information is not immediately and efficiently impounded into their prices. The empirical evidence presented in this study shows that analysts who cover several firms in the industry help transferring this information. Specifically, I find that analysts who cover a firm issuing a management forecast provide more accurate and more timely earnings forecast revisions following the issuance of this management forecasts for the other firms in the same industry than analysts who do not cover the firm issuing the management forecast. This effect is stronger for analysts who are experienced in covering the firm issuing the management forecast. Investors are more responsive to the forecast revisions made by analysts following the firm issuing management forecast.