Risk pooling, supply chain hierarchy, and analysts' forecasts

• Main Authors: HU, Nan, KE, Jian-Yu, LIU, Ling, ZHANG, Yue
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2019
• Subjects: risk pooling; supply chain hierarchy; analyst forecast accuracy; public vs. private information; systematic risk; Databases and Information Systems; Finance and Financial Management; Operations and Supply Chain Management
• Online Access: https://ink.library.smu.edu.sg/sis_research/8011; https://ink.library.smu.edu.sg/context/sis_research/article/9014/viewcontent/RiskPooling_av.pdf
• Institution: Singapore Management University

We investigate whether a firm's risk pooling affects its analysts' forecasts, specifically in terms of forecast accuracy and their use of public vs. private information, and how risk pooling interacts with a firm's position in the supply chain to affect analysts' forecasts. We use a social network analysis method to operationalize risk pooling and supply chain hierarchy, and find that risk pooling significantly reduces analysts' forecast errors and increases (decreases) their use of public (private) information. We also find that the positive (negative) relationships between risk pooling and analyst forecast accuracy and analysts' use of public (private) information are more pronounced upstream than downstream in a supply chain.