Analyst teams and the assembly bonus
Abstract
Purpose
Analyst team forecasts are the most frequent form of earnings expectations available to investors, with teams issuing more than 70% of research reports in 2016. Prior research provides differing evidence on whether analyst teams issue higher or lower quality forecasts than individual analysts.
Design/methodology/approach
I use a sample of more than 17,000 hand-collected analyst reports representing 7,586 forecasts from 89 companies in three industries from 1994–2005.
Findings
I document that analyst teams benefit from an assembly bonus, and issue more accurate forecasts than individual analysts only in time periods when teams would be expected to benefit from an assembly bonus.
Practical implications
I outline multiple factors within the control of brokerage houses that impact teams’ relative forecast quality, such as the number of members in the team, how long the team has worked as a unit and the costliness of integrating information when forming a forecast.
Originality/value
Given the preponderance of analyst teams and the strength of market reaction to their forecasts, it is valuable to document factors both in the past and present likely to affect analyst teams’ relative forecast accuracy.
Keywords
Acknowledgements
I thank my dissertation committee members Cristi Gleason (Chair), Dan Collins, Paul Hribar, Mark Penno and Eean Crawford for their valuable guidance and advice. I also thank workshops from the University of Iowa, the Ohio State University, the University of Missouri, Binghamton University, the University of Nebraska, Utah State University and Florida State University. I am grateful to Jane Song, Brad Hepfer, Stephannie Laroque, Bingxu Fang, Artur Hugon and anonymous reviewers for their helpful comments. I gratefully acknowledge financial support from the Tippie College of Business, the University of Nebraska-Lincoln and Utah State University.
Citation
Brightbill, K. (2024), "Analyst teams and the assembly bonus", Journal of Accounting Literature, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/JAL-12-2022-0135
Publisher
:Emerald Publishing Limited
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