We investigate whether a firm's risk pooling affects its analysts' forecasts, specifically in terms of forecast accuracy and their use of public vs. private information, and how risk pooling interacts with a firm's position in the supply chain to affect analysts' forecasts. We use a social network analysis method to operationalize risk pooling and supply chain hierarchy, and find that risk pooling significantly reduces analysts' forecast errors and increases (decreases) their use of public (private) information. We also find that the positive (negative) relationships between risk pooling and analyst forecast accuracy and analysts' use of public (private) information are more pronounced upstream than downstream in a supply chain.
Bibliographical noteProfessor Hu is grateful for the financial support from the National Natural Science Foundation of China (grant number: 71772150) and Young Talent Recruiting Plans of Xi’an Jiaotong University (grant number GL1J009).
- Analyst forecast accuracy
- Public vs. private information
- Risk pooling
- Supply chain hierarchy
- Systematic risk