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Earnings Forecast Accuracy And Career Concerns

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  • Tristan Roger

    (DRM - Dauphine Recherches en Management - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique)

Abstract

Previous studies show that analysts' compensation is not linked to earnings forecast accuracy. We evidence however that analysts have incentives to issue accurate forecasts. We show that brokerage houses reward their best forecasters by assigning them to large, mature firms. Covering such firms increases the potential for future compensation as these firms generate a great deal of investment banking and trading activities. The coverage of such firms also increases analysts' exposure to large buy-side investors. We find that analysts covering large, mature firms are twice as likely to be recognized as star analysts by Institutional Investor. We explain our findings on forecast accuracy as the result of brokerage houses' concerns for reputation.

Suggested Citation

  • Tristan Roger, 2015. "Earnings Forecast Accuracy And Career Concerns," Post-Print hal-01483837, HAL.
    • Handle: RePEc:hal:journl:hal-01483837
    Note: View the original document on HAL open archive server: https://hal.science/hal-01483837
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    References listed on IDEAS

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