ABSTRACT
Research finds that analysts limit managers’ ability to learn from their firms’ stock prices by disseminating information already known to managers. However, regulatory changes have since motivated analysts to produce more information unknown to managers. As a result, we hypothesize that analysts enhance managerial learning from prices in the current environment. Our findings support this: in the regulatory environment post-Reg FD and the Global Settlement, analysts increase managerial learning from prices, especially when analysts are of higher quality or provide insights to traders who are likely to incorporate private information into prices. Our results are robust to controlling for managerial disclosure, considering the impact of correlated omitted variables, and employing brokerage mergers and closures to identify exogenous reductions in analyst coverage. Our findings update the understanding of analysts’ role in shaping managerial learning from prices.
JEL Classifications: G1; G14.
