Intrafirm Knowledge Sharing in the Investment Research Industry

We study interdepartment knowledge sharing in an investment research setting where the benefits are potentially significant for the brokerage and the capital market, but so are the frictions impeding it. Using hand-collected data on equity analyst access to in-house debt research expertise, we find significant benefits to equity analysts in the form of improved ability to forecast cash flows and to anticipate credit rating downgrades. Moreover, we find evidence that access to management and research expertise underlie in-house debt analysts’ capacity to generate information beneficial to equity analysts. Finally, these benefits exist only in the presence of a collaborative brokerage culture or debt-equity analyst collocation, consistent with these factors promoting knowledge sharing in the investment research industry. This paper was accepted by Brian Bushee, accounting. Supplemental Material: The data files and online appendix are available at https://doi.org/10.1287/mnsc.2023.4809 .