Judgment effects of familiarity with an analyst’s name

We conduct an experiment with MBA students where we manipulate whether participants are exposed to an analyst’s name in Stage 1, and whether they are given a cue in Stage 2 about the particular analyst’s prior performance as an All-star analyst. We find that in the absence of a favorable performance cue about the analyst, mere exposure to the analyst’s name enhances perceived analyst credibility, which in turn influences the investors’ earnings estimates. This suggests a benefit to analysts in terms of building credibility merely through media exposure that cannot be explained by performance. In fact, a diagnostic cue such as the analyst’s high prior performance no longer matters to investors once they have prior exposure to the analyst’s name. However, this enhancement of an analyst’s credibility through investors’ prior exposure to his/her name is reversed when the analyst’s forecast turns out to be inaccurate.