BAFI Academic Seminarhttps://weatherhead.case.edu/events/2018/03/08/bafi-academic-seminar
We study cultural diversity on Wall Street using information about sell side analysts’ cultural backgrounds. We find evidence consistent with higher levels of cultural diversity improving the accuracy of analysts’ consensus forecasts, and reducing optimism bias and dispersion. The positive effects of diversity on consensus forecast accuracy are more pronounced when firms have more opaque information environments, but also exhibit declining returns to scale. These results are robust to controlling for other dimensions of diversity (i.e., gender and educational diversity). Further, using exogenous shocks to analyst coverage resulting from brokerage house mergers, we find that drops in analyst coverage that reduce cultural diversity have a more significant impact on forecast accuracy. In additional analyses, we explore conference calls as one plausible mechanism for diversity to improve information flows, and find that cultural diversity is associated with more interaction on conference calls (as evidenced by analysts raising more questions on calls). Overall, our findings offer important insights on the effects of diversity between competitive agents.
||Thursday, March 8, 2018 from 9 a.m. to 10:30 a.m.
||Peter B. Lewis Building, Room 05
11119 Bellflower Road
Cleveland, OH 44106-7235
||Speaker(s): Roni Michaely, Cornell
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