Are Individual Analysts’ Responses to Management Forecasts Conditioned by Managers’ Forecasting Track Records?

We examine the extent to which analysts’ responses to management forecasts are influenced by the forecasting track records of the managers issuing the forecast, distinct from the track records of their firms. We find that analysts’ forecast revisions in response to management forecast news, measured at the analyst level, are positively conditioned by the manager’s track record for accuracy and firm’s track records for accuracy and consistency. We also find that analyst sensitivity to the conditioning effect of managers’ track records for accuracy increases with analyst experience. Additional analyses reveal that the nature of analyst responses to management forecasts, in terms of agreement or disagreement, are also influenced by manager and firm track records. Further, we find that the market tends to follow analysts’ leads in responding to management forecasts, consistent with analysts being a channel through which the market is informed of the conditioning effect of managers’ track records for accuracy.