No Signal Is Bad Signal: Analyst Silence After On‐Site Visits

ABSTRACT Silence can convey material information in financial markets. This study examines the silence of financial analysts, as identified by their non‐reporting behaviour following corporate visits. We find that analysts asymmetrically remain silent when they obtain less favourable information. Analyst silence is associated with significantly negative future cumulative abnormal returns and future earnings disappointments. The effect is more pronounced when analysts have issued more bullish recommendations for the firm, when they are affiliated with the firm and when the firm has lower coverage by peer analysts. Furthermore, we show that institutional investors trade in line with the nature of information content underlying analyst silence, while retail investors appear to be misled and bear the costs.