Does Product Market Competition Influence Analyst Coverage and Analyst Career Success?

58 Pages Posted: 6 Dec 2015 Last revised: 28 May 2017

Charles Hsu

Hong Kong University of Science & Technology

Xi Li

Hong Kong University of Science & Technology (HKUST)

Zhiming Ma

Peking University

Gordon M. Phillips

Dartmouth College - Tuck School of Business; National Bureau of Economic Research (NBER)

Date Written: May 26, 2017

Abstract

We use information from product descriptions in firm 10-Ks to analyze whether product market competition influences analysts’ decisions to cover firms, the accuracy and consistency of their earnings reports and their likelihood of obtaining Analyst All-Star status. We find that a firm’s analyst coverage and analyst forecast accuracy and consistency increase with product market competition and when firms are covered by analysts who also cover a larger fraction of the firm’s competitors. Analyst decisions to cover new firms or drop firms from their coverage are also related to whether the firms are competitors of the existing firms in their coverage portfolios. We also show that analysts whose portfolios comprise a larger fraction of firms that are competitors are more likely to obtain Analyst All-Star status.

Keywords: Competition, Analysts, All-Star, Stock Analysts

JEL Classification: G24, L16

Suggested Citation

Hsu, Charles and Li, Xi and Ma, Zhiming and Phillips, Gordon M., Does Product Market Competition Influence Analyst Coverage and Analyst Career Success? (May 26, 2017). Tuck School of Business Working Paper No. 2698331. Available at SSRN: https://ssrn.com/abstract=2698331 or http://dx.doi.org/10.2139/ssrn.2698331

Charles Hsu

Hong Kong University of Science & Technology ( email )

Hong Kong
Hong Kong
852-2358-7568 (Phone)
852-2358-1693 (Fax)

Xi Li

Hong Kong University of Science & Technology (HKUST) ( email )

Clearwater Bay
Kowloon, 999999
Hong Kong

Zhiming Ma

Peking University ( email )

Department of Accounting
Guanghua School of Management
Beijing, 100871
China

Gordon M. Phillips (Contact Author)

Dartmouth College - Tuck School of Business ( email )

Hanover, NH 03755
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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