It is a small world: The effect of analyst-media school ties on analyst performance

We examine the effect of school ties between sell-side analysts and media executives on the improvement in analysts' performance during the release of informative negative news. Our baseline results and mechanism tests show that analysts obtain fragmented private information to improve their earnings forecast accuracy by taking advantage of the school ties with financial media executives. To establish causality, we perform several identification strategies, such as entropy balancing matching, cross-sectional analyses during university anniversary gatherings, and a placebo test. Further, we find that analysts with less herding behaviors benefit more from the school tie effect. Besides, we reveal that connected analysts are more likely to issue reports in a timely manner after the release of informative negative news, and these revisions in earnings forecast elicit significantly positive market reactions. At the same time, we notice that the media are more likely to interview alumni-affiliated analysts, providing potential evidence of an informational interaction between financial analysts and the media.