The Real Effects of Analyst Coverage

50 Pages Posted: 31 May 2012

See all articles by François Derrien

François Derrien

HEC Paris - Finance Department

Ambrus Kecskes

York University - Schulich School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: March 23, 2011


We study the causal effects of analyst coverage on corporate investment and financing policies. We hypothesize that a decrease in analyst coverage increases information asymmetry and thus increases the cost of capital; as a result, firms decrease their investment and financing. We use broker closures and broker mergers to identify changes in analyst coverage that are exogenous to corporate policies. Using a difference-in-differences approach, we find that firms that lose an analyst decrease their investment and financing by 1.9% and 2.0% of total assets, respectively, compared to similar firms that do not lose an analyst. These results are significantly stronger for firms that are smaller, have less analyst coverage, have a bigger increase in information asymmetry, and are more financially constrained.

Suggested Citation

Derrien, François and Kecskes, Ambrus, The Real Effects of Analyst Coverage (March 23, 2011). Available at SSRN: or

François Derrien (Contact Author)

HEC Paris - Finance Department ( email )

1 rue de la Liberation
Jouy-en-Josas Cedex, 78351
33 1 39 67 72 98 (Phone)


Ambrus Kecskes

York University - Schulich School of Business ( email )

4700 Keele Street
Toronto, Ontario M3J 1P3

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