ICEF/LFE Research Seminar by Phillip C. Stocken (Dartmouth College)
On Thursday, October 17 ICEF and LFE held the Research Seminar in Finance.
Theme: "Public Communication between Rival Managers and Analysts" joint with Xu Jiang
Abstract: We examine the public two-way communication of information between managers and analysts. Rival managers can choose to disclose their information, and analysts have the opportunity to comment on it. While a firm manager recognizes that its rival will exploit the firm’s disclosure, the firm hopes that the analyst’s comments it receives will allow the firm to optimize its production and thereby more than offset this disadvantage. An analyst may be unwilling to comment, however, as the analyst’s and manager’s interests may be misaligned. Our analysis identifies how communication between rival managers and analysts is impacted by a manager’s uncertainty about an analyst’s interests and a rival manager’s and an analyst’s information endowments. It also examines how the recently proposed Regulation Best Interest requiring the disclosure of analysts’ conflict of interest affects the communication between managers and analysts. We find that this policy may have beneficial real effects and hence enhance social welfare.