Cross-Industry Information Sharing among Colleagues and Analyst Research

We identify a specific organizational resource in brokerage houses—information sharing among analyst colleagues who cover economically related industries along a supply chain. We hypothesize that this resource constitutes a knowledge asset that benefits analyst research and allows analysts to have a higher level of industry specialization. The impact of this resource depends on colleagues' information complementarity, which we measure using the level of economic connection between an analyst's industry and her colleagues' industries. Controlling for economic determinants and brokerage selection effects, we find that colleagues' information sharing improves the analyst's earnings forecast accuracy, stock recommendation profitability, and investor recognition. We show that the colleagues' coverage of downstream (upstream) industries improves the analyst's revenue (expense) forecasts. We find that information sharing among colleagues allows analysts, especially less capable ones, to cover a more specialized research portfolio. Overall, our findings align with the theory of the firm that a firm's organizational structures contribute to employee performance and specialization