What is it about?
In a large-scale natural field experiment covering more than 25 years, we build on past literature showing that favoritism can arise from coincidental similarities like sharing a first name. We find that when a CEO of a firm shares a first name with the analyst covering that firm, the analyst makes more accurate forecasts of the firm's performance. We offer converging evidence that this is due to the illegal, private sharing of information to these privileged analysts.
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Why is it important?
Not only is favoritism born of name-matching unethical, it's also illegal. In 2000, the SEC passed a regulation requiring that any material information privately shared between a CEO and analyst be publicly disclosed. However, oversight remains poor and the definition of "material" murky. As a result, others have shown, information continues to flow privately despite the regulation. This increased accuracy can result in lucrative compensation, bonuses, and promotions for name-matched analysts. Given that most of the name-matched analysts in our dataset are disproportionately likely to be White and male, there are further distributional consequences of this kind of privilege.
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This page is a summary of: Sharing names and information: Incidental similarities between CEOs and analysts can lead to favoritism in information disclosure, Proceedings of the National Academy of Sciences, November 2023, Proceedings of the National Academy of Sciences,
DOI: 10.1073/pnas.2311250120.
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