Analysts’ Information Acquisition When Firms Are Trustworthy: Evidence from an Emerging Market

Using a survey-based measure of trustworthiness in the emerging market, we find that firm trustworthiness contributes to analysts’ information acquisition and, ultimately, their performance. Additionally, we find that female analysts, experienced analysts, and star analysts benefit more from firm trustworthiness. Further tests suggest that the potential mechanisms through which firm trustworthiness improves analyst forecast accuracy are reducing information risk and lowering information acquisition cost. Cross-sectional analyses reveal that the effect is more pronounced for firms located in regions with weaker investor protection and firms with less media coverage. Reinforcing our main evidence, we also find that firm trustworthiness is linked to decreased analyst forecast dispersion. Overall, our findings highlight the important role of firm trustworthiness in analysts’ information acquisition. JEL Classifications: G14; G24; M41.