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Does Industry Competition Influence Analyst Coverage Decisions and Career Outcomes?

Published online by Cambridge University Press:  03 June 2022

Charles Hsu ,
Xi Li ,
Zhiming Ma  and
Gordon M. Phillips Open the ORCID record for Gordon M. Phillips [Opens in a new window]
Charles Hsu
Affiliation:
Hong Kong University of Science and Technology Business School [email protected]
Xi Li
Affiliation:
University of Arkansas, Walton College of Business [email protected]
Zhiming Ma
Affiliation:
Peking University, Guanghua School of Management [email protected]
Gordon M. Phillips*
Affiliation:
Dartmouth College, Tuck School of Business
*
[email protected] (corresponding author)
Rights & Permissions [Opens in a new window]

Abstract

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We analyze whether industry competition influences analyst coverage decisions and whether analysts benefit from covering product market competitors. We find that analysts are more likely to cover a firm when this firm competes with more firms already covered by the analyst. We also find that the intensity of competition among these competitors is additionally important to the coverage decision. Moreover, we find that analysts who cover product market competitors are more likely to obtain analyst star status. These results are consistent with the importance to analysts of industry competition and product market knowledge accumulated through covering product market competitors.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 58 , Issue 2 , March 2023 , pp. 711 - 745
Creative Commons
Creative Common License - CCCreative Common License - BY
This is an Open Access article, distributed under the terms of the Creative Commons Attribution licence (https://creativecommons.org/licenses/by/4.0), which permits unrestricted re-use, distribution and reproduction, provided the original article is properly cited.
Copyright
© THE AUTHOR(S), 2022. Published by Cambridge University Press on behalf of the Michael G. Foster School of Business, University of Washington

Footnotes

We thank an anonymous referee, Joseph Gerakos and colleagues at Dartmouth, Jarrad Harford (the editor), and workshop participants at Chinese University of Hong Kong, Chulalongkorn University, Hong Kong University of Science and Technology, Peking University, Shanghai University of Finance and Economics, University of Hong Kong, University of Las Vegas, University of Southern California, Tsinghua University and Xiamen University for their helpful comments.

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