Monetary Shocks and the Analyst Coverage of the Firm

9 Pages Posted: 17 Jun 2022 Last revised: 27 Aug 2022

See all articles by Samer Adra

Samer Adra

University of Sheffield

Leonidas G. Barbopoulos

University of Edinburgh

Date Written: July 15, 2022

Abstract

We examine how monetary shocks influence firm-level analyst coverage. We build on the notion that analysts reduce their coverage of firms with challenging business conditions. We find that contractionary monetary shocks, which are known to reduce growth and tighten lending, significantly reduce firm-level analyst coverage. On average, a one-standard-deviation contractionary shock reduces the analyst coverage of the average firm by roughly 10%. The reduction in analyst coverage is more pronounced for high-leverage firms that are likely to struggle under tight monetary conditions. The reduction in analyst coverage of high-leverage firms is almost 50% larger, and much faster, than the reduction in the coverage of low-leverage firms. Our results emphasize the informational consequences of monetary policy.

Keywords: Monetary Policy, Analyst Coverage, Leverage.

Suggested Citation

Adra, Samer and Barbopoulos, Leonidas G., Monetary Shocks and the Analyst Coverage of the Firm (July 15, 2022). Available at SSRN: https://ssrn.com/abstract=4139022 or http://dx.doi.org/10.2139/ssrn.4139022

Samer Adra (Contact Author)

University of Sheffield ( email )

17 Mappin Street
Sheffield, Sheffield S1 4DT
United Kingdom

Leonidas G. Barbopoulos

University of Edinburgh ( email )

University of Edinburgh Business School
29 Buccleuch Place
Edinburgh, Scotland EH8 9JS
United Kingdom

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