Do Managers Learn From Analyst Earnings Forecasts of Peer Firms? Evidence From Labor Investment Decisions

Labor investment decisions require firms to adjust employment dynamically in response to changes in external market and industry conditions. As important information intermediaries in capital markets, analysts provide forward-looking signals about peer firms and industry prospects that may shape managerial decision-making. Using a sample of Chinese A-share listed companies from 2007 to 2023, this study examines how peer analysts’ forecast dispersion affects firms’ labor investment efficiency. The results show that greater dispersion in peer analysts’ earnings forecasts reduces labor investment efficiency by weakening firms’ learning from external information and aggravating information frictions. Cross-sectional tests show that this effect is moderated by macro-level factors, such as population aging and external media attention; industry-level factors, such as market competition intensity and labor intensity; and firm-level factors, such as labor income share and institutional investor ownership. Additional analyses show that this effect mainly operates through labor under-investment rather than over-investment. This study highlights the role of analyst forecast quality in labor investment and offers practical implications for corporate human capital allocation.