Product Market Competition and Analyst Coverage Decisions

54 Pages Posted: 6 May 2020

See all articles by Charles Hsu

Charles Hsu

Hong Kong University of Science & Technology

Xi Li

University of Arkansas - Department of Finance

Zhiming Ma

Peking University

Gordon M. Phillips

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

Date Written: April 12, 2020

Abstract

We analyze whether product market competition is an important factor in analyst coverage decisions and whether analysts benefit from covering product market competitors. We find that analysts are more likely to cover a firm When this firm competes with and offers more similar products to the firms already covered by the analyst. We also find that analysts who cover product market competitors are more likely to obtain star status and issue more informative recommendations. Collectively, these results are consistent with the importance of industry and product market knowledge obtained through covering product market competitors to analysts.

Keywords: Analysts, industry knowledge, all star, competition

JEL Classification: G24, L20

Suggested Citation

Hsu, Charles and Li, Xi and Ma, Zhiming and Phillips, Gordon M., Product Market Competition and Analyst Coverage Decisions (April 12, 2020). Available at SSRN: https://ssrn.com/abstract=3574830 or http://dx.doi.org/10.2139/ssrn.3574830

Charles Hsu

Hong Kong University of Science & Technology ( email )

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

Xi Li

University of Arkansas - Department of Finance ( email )

Fayetteville, AR 72701
United States

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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