Busy Analysts and Firm Monitoring

76 Pages Posted: 5 Jun 2020

See all articles by Omesh Kini

Omesh Kini

Georgia State University

Michael J. Rebello

University of Texas at Dallas - Naveen Jindal School of Management

Ashutosh Tyagi

affiliation not provided to SSRN

Date Written: May 5, 2020

Abstract

Consistent with the view that “busy” analysts face time and effort constraints in monitoring firms, we find that higher busyness lowers firm valuation. The underlying mechanisms include lower operating performance, higher cost of capital, greater earnings management, excessive CEO compensation, and lower institutional ownership. These effects are less pronounced for larger firms and when analysts have greater experience covering the firm/industry. Our inferences are supported by a novel experimental design based on shocks to analyst busyness from broker mergers. These results suggest that analyst monitoring relies not only on the level of analyst coverage, but also on its quality.

Keywords: Sell-side analysts, Analyst busyness, Information environment, Firm monitoring

JEL Classification: G30, G32, G34, K22, L22, L25

Suggested Citation

Kini, Omesh and Rebello, Michael J. and Tyagi, Ashutosh, Busy Analysts and Firm Monitoring (May 5, 2020). Available at SSRN: https://ssrn.com/abstract=3596253 or http://dx.doi.org/10.2139/ssrn.3596253

Omesh Kini

Georgia State University ( email )

University Plaza
Atlanta, GA 30303-3083
United States
404-651-2656 (Phone)

Michael J. Rebello (Contact Author)

University of Texas at Dallas - Naveen Jindal School of Management ( email )

P.O. Box 830688
Richardson, TX 75083-0688
United States

Ashutosh Tyagi

affiliation not provided to SSRN

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
63
Abstract Views
299
rank
409,700
PlumX Metrics