6.07: Analysts' Use of Technology and ESG Information

We examine how salient signals of broad economic trends shape financial analysts' forecasting, using U.S. MSA-level electric vehicle (EV) adoption as a proxy for local environmental salience. After controlling for MSA, analyst, and firm characteristics, analysts in high-EV areas make more accurate forecasts for green firms. This improvement reflects not a net gain in forecasting ability, but a reallocation of limited attention and effort towards green firms. The effect is stronger among male, younger, and less busy analysts, in climate-conscious regions, and for harder-to-value firms, and is accompanied by more frequent forecast revisions, greater climate-related engagement during earnings calls, and increased use of opportunity-oriented climate language in analysts' reports. Markets respond more strongly to forecast revisions by these analysts, and the information environment of green firms improves under their coverage. 

We study the value of green analysts, referring to financial analysts with domain knowledge in environmental and sustainability issues. The prevalence of green analysts, identified through their educational background or work experience, has risen steadily over time. Compared to peers, green analysts engage more in sustainability-related discussions during earnings conference calls. Markets respond disproportionately to their downside recommendations, reflecting investors' heightened attention to ESG-related downside risks. The exception is socially responsible investors, who also react to their upside recommendations by increasing ownership. Further analysis confirms that green analysts provide unique forward-looking sustainability insights. Exploiting broker closures as exogenous shocks, we document that green analyst coverage enhances corporate sustainability outcomes and attracts sustainability-focused investors. Our findings highlight the significance of green analysts in shaping market perceptions, guiding capital allocation, and disciplining firms' sustainability practices. 

We examine the association between sell-side analysts' usage of data visualization and the quality of their equity reports using a sample of analyst reports from 2013 to 2022. First, consistent with data visualization helping analysts improve the quality of their reports, we find a significant positive association between data visualization use and the accuracy of analysts' earnings forecasts. This result persists using a variety of specifications (e.g., fixed effects, entropy balancing, and additional controls), and varies cross-sectionally in predictable ways. Specifically, the association is stronger when analysts cover firms where cognitive demands are likely to be higher, when the benefits of visual support are amplified, and when analysts better integrate their data visualizations into the text of their reports. In contrast, the association is weaker for more experienced and busy analysts, who likely place less reliance on data visualization. Second, consistent with data visualization producing insights for analysts and improving the quality of their reports, we find that analysts' use of data visualization is positively related to both the mapping between their earnings forecasts and target prices and the association between their target price revisions and stock returns. Taken together, our findings suggest that visualizations are not merely stylistic choices or persuasive devices; rather, they are integral to the way sell-side analysts construct and communicate their research outputs.