by Tom Snee

A new study from the Tippie College of Business finds financial analysts were less accurate in their earnings forecasts during the COVID-19 pandemic, but they returned to pre-pandemic accuracy levels once the lockdowns were lifted. 

Michael Durney, professor of accounting and study co-author, said the disparity was likely the result of analysts who previously relied on in-person meetings with corporate managers and subject matter experts to get information having to communicate on Zoom meetings and phone calls instead. He said the study shows personal interaction plays a role in passing along information, which could affect not just earnings forecasts but also the productivity of workers who work at home or the office. 

Durney said the drop in accuracy—which was about 4%—was most noticeable with analysts who relied on in-person meetings before the pandemic. Analysts who participated in fewer in-person meetings saw their accuracy less affected by the lockdowns because they had developed other effective methods of gathering information besides personal interactions. 

Durney said the study reinforces the notion that people get information from such non-verbal cues as body language, eye movement, or hand movements during conversations. That information adds to what we’re being told verbally in helping us more fully understand something and make better decisions. It’s also more difficult, if not impossible, to gather that information from an online meeting or phone call. 

One surprise finding from the study is that physical interactions even with other analysts at in-person meetings increased accuracy, demonstrating that analysts gain useful information through interactions with their competitors as well as from managers.

Durney said the findings also have implications in the current discussion about return-to-office mandates that many firms are making of their employees. Since the findings suggest interpersonal mingling can improve analysts’ work quality, then mingling at the office has value and makes it easier to pass information from one worker to another. He said that advantage may be lost when everyone is working from home. 

Durney’s study, “Forecasting Earnings from Home,” will be published in a forthcoming issue of the journal Management Science.

Media contact: Tom Snee, 319-384-0010 (o); 319-541-8434 (c); tom-snee@uiowa.edu