Can FinTech competition improve sell-side research quality?
Authors | Jame, Markov, Wolfe |
Journal | The Accounting Review |
Year | 2022 |
Type | Published Paper |
Abstract | We examine how increased competition stemming from an innovation in financial technology influences sell-side analyst research quality. We find that firms added to Estimize, an open platform that crowdsources short-term earnings forecasts, experience a pervasive and substantial reduction in consensus bias and a limited increase in consensus accuracy relative to matched control firms. Long-term forecasts and investment recommendations remain similarly biased, alleviating the concern that the documented reduction in bias is a response to broad economic forces. At the individual analyst level, we find that bias reduction is more pronounced among close-to-management analysts, and that more biased analysts respond by reducing their coverage of Estimize firms. The collective evidence suggests that competition from Estimize improves sell-side research quality by discouraging strategic bias. |
Keywords | Analysts, forecast bias, FinTech, crowdsourcing |
URL | https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2915817 |
Tags | Archival Empirical | Manager / Firm Behavior |