The dark side of analyst coverage: The case of innovation

• 成果类型: Article
• 署名作者: He, Jie (Jack); Tian, Xuan
• 署名单位: University System of Georgia; University of Georgia; Indiana University System; IU Kelley School of Business; Indiana University Bloomington
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2013.04.001
• 发表日期: 2013
• 页码: 856-878
• 关键词: innovation; ANALYST COVERAGE; patents; citations; Managerial myopia

摘要

We examine the effects of financial analysts on the real economy in the case of innovation. Our baseline results show that firms covered by a larger number of analysts generate fewer patents and patents with lower impact. To establish causality, we use a difference-indifferences approach that relies on the variation generated by multiple exogenous shocks to analyst coverage, as well as an instrumental variable approach. Our identification strategies suggest a negative causal effect of analyst coverage on firm innovation. The evidence is consistent with the hypothesis that analysts exert too much pressure on managers to meet short-term goals, impeding firms investment in long-term innovative projects. We further discuss possible underlying mechanisms through which analysts impede innovation and show that there is a residual effect of analysts on innovation even after controlling for these mechanisms. Our paper offers novel evidence on a previously under-explored adverse consequence of analyst coverage-its hindrance to firm innovation. (c) 2013 Elsevier B.V. All rights reserved.