Buy-Side Analysts and Earnings Conference Calls

Abstract

Companies’ earnings conference calls are perceived to be venues for sell-side equity analysts to ask management questions. In this study, we examine another important conference call participant — the buy-side analyst — that has been underexplored in the literature due to data limitations. Using a large sample of transcripts, we identify 3,834 buy-side analysts from 701 institutional investment firms that participated (i.e., asked a question) on 13,332 conference calls to examine the determinants and implications of their participation. Buy-side analysts are more likely to participate when sell-side analyst coverage is low and dispersion in sell-side earnings forecasts is high, consistent with buy-side analysts directly acquiring information when a company’s information environment is poor. Institutional investors trade more of a company’s stock in the quarters in which their buy-side analysts participate on the call. Finally, we find evidence that buy-side analyst participation is associated with company-level changes in trading volume, institutional ownership, and short interest.