Analyst Following and the Influence of Disclosure Components, Ipos and Ownership Concentration
35 Pages Posted: 22 May 2003
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Analyst Following and the Influence of Disclosure Components, Ipos and Ownership Concentration
Date Written: April 8, 2003
Abstract
Financial analysts serve an important role as intermediaries between firms and investors. In this paper, I investigate factors associated with variations in analyst following using an international sample. Prior research has found that analyst coverage is positively associated with overall firm disclosure. I hypothesize and find that not all forms of disclosure are equally important to analysts. Specifically, controlling for firm- and country-level factors, I document that analyst following is more strongly associated with the extent of note disclosure than the comprehensiveness of the basic financial statements. I further find that analyst following is greater in environments with active IPO markets, suggesting that analysts value the potential for future revenues. Finally, I show that analyst following is negatively related to firm ownership concentration. This is consistent with concentrated ownership changing the nature of the agency problem and reducing the value of analyst-provided services.
Keywords: Analyst following, disclosures, IPO, ownership structure, international
JEL Classification: M41, N20, G29, G24, G32
Suggested Citation: Suggested Citation
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