Firm site visits and differential information of text in analyst reports

ABSTRACT We quantify differential information of text in analyst reports by adopting the methodology of cosine similarity and investigate the role of analysts’ firm site visits in the differential information of their reports. We find that the analysts who conduct a visit to a firm site provide more differential information than those who do not, and this process of collecting information by a visit is affected by analyst–firm factors. Specifically, an analyst’s visit and visit frequency of a firm three months before his/her reports are issued are positively associated with the differential information of text in the reports. This effect is more pronounced among reports of worse firm information transparency, more analysts’ local advantage, and stronger analyst–firm relationships. This finding is robust with different measurements of text information, local advantage and analyst–firm relationships. Moreover, we find that the differential information of text in analyst reports through visits to firm sites is more likely to be private information rather than inside information.

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