This study examines whether analysts have an industry‐level information advantage over managers when forecasting earnings. While analysts are often viewed as industry experts, prior research fails to document such an advantage. We predict that analysts' industry‐level information advantage is more likely to exist in industries where firm performance is more sensitive to industry‐level external economic forces. We find that for such firms, analysts provide relatively more accurate earnings forecasts compared to managers. Consistent with our predictions, we further find that managers of such firms provide fewer and less precise forecasts and that this association is more pronounced in firms with higher analyst following. Collectively, these findings suggest that analysts have an industry‐level information advantage over managers when forecasting earnings for firms in industries with high sensitivity to external forces, and that industry sensitivity risk is a distinct industry characteristic that affects firm‐level disclosure.

In 2005, the SEC suffered a high‐profile loss in its first court case, SEC v. Siebel Systems, Inc. , in an effort to enforce Regulation Fair Disclosure (Reg FD). We examine the impact of this loss on managers' selective disclosure to sell‐side analysts. We provide evidence that the informativeness of analyst reports increased after the Siebel decision, especially for observable instances of private meetings. This finding suggests that such selective disclosure increased significantly after the court's decision. Our results also suggest that the increased selective disclosure faded as the SEC resumed enforcement actions related to Reg FD in 2009. In exploratory analyses, we survey and interview law firm partners to investigate possible mechanisms for our results; their responses suggest that the Siebel outcome reduced manager concern about liability from selective disclosure. Collectively, our results highlight how the anticipated costs of regulatory enforcement affect private information flow from managers to analysts in particular.