The effect of social skills on analyst performance

Abstract

Social skills are important but difficult to measure. So far, few empirical studies have examined the effect of social skills on the performance of professionals. Using the number of LinkedIn connections as a proxy for social skills, we investigate the effect of financial analysts' social skills on their performance. We use multiple ways to validate the measure of social skills and show that analysts with better social skills produce more accurate earnings forecasts and that their stock recommendations elicit stronger market reactions. Furthermore, these socially skilled analysts are more likely to be voted as All‐Star Analysts. This study provides the first large‐sample evidence highlighting the importance of social skills on financial analysts' performance.