The Media Response to a Loss of Analyst Coverage

Abstract

This paper examines how the media responds to the loss of analyst coverage resulting from brokerage mergers and closures. We find some evidence of an overall decrease in media coverage of affected firms, consistent with analysts serving as a useful information source for the media. However, media coverage during the earnings announcement (EA) significantly increases, consistent with the media switching their efforts to events with more non-analyst (e.g., firm-provided) information available. Both the overall decrease and the shift towards the EA are more pronounced for journalists who are more likely to rely on analysts and for firms that provide more information to supplement their EA (e.g., guidance and investor relations). Overall, our paper suggests that the loss of analyst coverage increases the costs of supplying media coverage, resulting in a decrease in media coverage as well as a greater focus on the EA within the remaining coverage.

Keywords: financial media, sell-side analysts, intermediary, news, earnings, sentiment

JEL Classification: G14, G24, G29, G30, M41