“Learning by Doing” or “Catering” —— Firm-Specific Experience and Analyst Forecast Accuracy

This research finds that firm-specific experience significantly reduces analyst forecast accuracy, indicating the existence of “catering” behavior by which analysts issue favorable forecasts for the listed companies they have long-time relationships. Heterogeneity analysis finds out that the impact of firm-specific experience on forecast accuracy is positive when the forecasts are made by analysts from small brokerage firms or issued for small listed companies, while it is negative when the analysts come from large brokerage firms or when they cover large listed companies; Mechanism analysis shows that analysts'“catering” behavior leads to decreased forecast accuracy by enlarging analysts’ forecast optimism