Does Industry Competition Influence Analyst Coverage Decisions and Career Outcomes?

Journal of Financial and Quantitative Analysis, forthcoming

Tuck School of Business Working Paper No. 3669846

59 Pages Posted: 17 Aug 2020 Last revised: 18 Nov 2021

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: October 14, 2021

Abstract

We analyze whether industry competition influences 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 more firms already covered by the analyst. We also find that the intensity of competition among these competitors is additionally important to the coverage decision. Moreover, we find that analysts who cover product market competitors are more likely to obtain analyst star status. These results are consistent with the importance to analysts of industry competition and product market knowledge accumulated through covering product market competitors.

Keywords: Industry Competition; Coverage Decisions; Career Outcomes; Analysts

JEL Classification: G24, L20

Suggested Citation

Hsu, Charles and Li, Xi and Ma, Zhiming and Phillips, Gordon M., Does Industry Competition Influence Analyst Coverage Decisions and Career Outcomes? (October 14, 2021). Journal of Financial and Quantitative Analysis, forthcoming, Tuck School of Business Working Paper No. 3669846, Available at SSRN: https://ssrn.com/abstract=3669846 or http://dx.doi.org/10.2139/ssrn.3669846

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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