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: Suggested Citation