Wei Chen’s research while affiliated with UNSW Sydney and other places

We investigate the joint effects of analyst reputation, uncertainty, and guidance news valence on analysts’ reliance on management guidance. We find that, compared to less reputable analysts, reputable analysts rely less on guidance when they issue earnings forecasts. This analyst reputation effect is stronger when earnings and information uncertainty are higher, or when the guidance contains good news. Further analysis suggests that both reputable and less reputable analysts sacrifice their forecast accuracy when they rely less on guidance; however, reputable analysts are compensated to a greater extent by the increased informativeness of their forecasts. Finally, we find that analysts’ future career advancement is enhanced when their reliance is low. This article is protected by copyright. All rights reserved

We conduct two experiments to investigate how investors react to attributions accompanying management guidance. In our first experiment, we find that investors provide lower earnings estimates when management attributes negative guidance news to external factors than internal factors. When the guidance news is positive, the locus (internal versus external) of the attributions has no effect on investors' earnings estimates. In our second experiment, we separate out the effect of the attribution's outcome controllability (controllable versus uncontrollable) from that of attribution locus in a negative guidance news setting. We find that investors provide higher earnings estimates for internal and outcome controllable attributions than for internal and outcome uncontrollable attributions attributions. Outcome controllability does not matter when attributions are external. Our study extends prior research by showing how the valence of management guidance and the characteristics of guidance attributions jointly influence investors' earnings judgments.

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. We also show a cost of media exposure in that the analyst’s credibility takes a bigger hit for inaccurate forecasts.