Do Professional Rankings Affect Analyst Behavior? Evidence From a Regression Discontinuity Design

This study examines how winning a significant industry award affects the behavior of finance professionals. Focusing on sell-side equity analysts and utilizing a novel data set from Institutional Investor on analyst rankings, we employ a regression discontinuity design that compares the postaward research outputs and behavior of third-place, all-star analysts with those of first runner-up analysts who barely miss the distinction. Our results show that third-place all-star winners are more optimistic in their forecasts and recommendations compared with first runner-up analysts after winning the award, and market reactions to their forecast revisions are stronger. The third-place winners also receive higher priority during earnings conference calls and experience better career outcomes. Our evidence is consistent with award-winning analysts leveraging their increased reputation and market influence to generate more trading commissions and career benefits. The broader inference of our findings is that finance professionals who win a significant award are likely to become more, rather than less, strategic.

This paper was accepted by Kay Giesecke, finance.

Supplemental Material: The online appendix and data files are available at https://doi.org/10.1287/mnsc.2023.04249.