Geographic Proximity and Analyst Coverage Decisions: Evidence from IPOs

45 Pages Posted: 27 Jun 2010 Last revised: 24 Oct 2014

Date Written: October 23, 2014

Abstract

Using hand-collected data on analyst locations, we study how geographic proximity affects analyst coverage decisions for U.S. firms that went public during 1996-2009, along with the impact of local coverage on firm visibility. Analysts are 80% more likely to cover local firms than non-local ones, and nearby non-underwriter analysts initiate coverage one to three weeks earlier than distant ones. Proximity matters most for smaller, less visible firms, for firms with less complex operations and for lower status analysts. Less visible firms may use local analyst coverage as a stepping-stone to increase visibility with other analysts and institutional investors.

Keywords: Geographic proximity; financial analyst; visibility; IPO; coverage

JEL Classification: G14, G24, G30, M13

Suggested Citation

O'Brien, Patricia C. and Tan, Hongping, Geographic Proximity and Analyst Coverage Decisions: Evidence from IPOs (October 23, 2014). Journal of Accounting & Economics (JAE), Forthcoming, Available at SSRN: https://ssrn.com/abstract=1630555 or http://dx.doi.org/10.2139/ssrn.1630555

Patricia C. O'Brien

University of Waterloo ( email )

200 University Avenue, West
Waterloo, Ontario N2L 3G1
Canada
1-519-888-4567 (Phone)
1-519-888-7562 (Fax)

Hongping Tan (Contact Author)

McGill University ( email )

1001 Sherbrooke St. West
Montreal, Quebec H3A1G5 H3A 2M1
Canada

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