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The Real Effects of Financial Shocks: Evidence from Exogenous Changes in Analyst Coverage

Abstract : We study the causal effects of analyst coverage on corporate investment and financing policies. We hypothesize that a decrease in analyst coverage increases information asymmetry and thus increases the cost of capital; as a result, firms decrease their investment and financing. We use broker closures and broker mergers to identify changes in analyst coverage that are exogenous to corporate policies. Using a difference-in-differences approach, we find that firms that lose an analyst decrease their investment and financing by 1.9% and 2.0% of total assets, respectively, compared to similar firms that do not lose an analyst.
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https://hal-hec.archives-ouvertes.fr/hal-00852356
Contributor : Antoine Haldemann <>
Submitted on : Tuesday, August 20, 2013 - 4:43:59 PM
Last modification on : Thursday, January 11, 2018 - 6:19:31 AM

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François Derrien, Ambrus Kecskés. The Real Effects of Financial Shocks: Evidence from Exogenous Changes in Analyst Coverage. Journal of Finance, Wiley, 2013, 68 (4), pp.1407-1440. ⟨10.1111/jofi.12042⟩. ⟨hal-00852356⟩

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