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Working Paper

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We show that a firm’s information environment is significantly impacted by the characteristics of the other firms its analysts cover. Analysts strategically allocate effort among portfolio firms by devoting more effort to firms that are relatively more important for their career concerns. Specifically, controlling for analyst and firm characteristics, we find that within each analyst’s portfolio, firms ranked relatively higher based on market capitalization, trading volume, or institutional ownership receive more accurate, frequent, and informative earnings forecast revisions and stock recommendation changes that contain greater information content from that analyst. Firms’ relative rank across analysts varies widely, so this is not a firm characteristic. As a result, even with explicit controls for firm characteristics, firms where a larger proportion of their analysts consider them as relatively more important are associated with more transparent information environments. Finally, we find that analysts who engage in a greater extent of career concerns-driven effort allocation are more likely to experience favorable career outcomes.


Sell-side analysts; Effort allocation; Limited attention; Career concerns; Earnings forecast; Stock recommendation; Firm information environment; Labor market outcomes


Corporate Finance | Finance and Financial Management

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Creative Commons License

Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License.

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(To be presented at 2017 AFA)