Analyst Coverage and Corporate Environmental Policies

Journal of Financial and Quantitative Analysis, Forthcoming

Leeds University Business School Working Paper No. 23-01

71 Pages Posted: 8 Dec 2022 Last revised: 28 Jun 2023

See all articles by Chenxing Jing

Chenxing Jing

University of International Business and Economics

Kevin Keasey

University of Leeds - Division of Accounting and Finance

Ivan Lim

Durham University

Bin Xu

University of Leeds

Date Written: November 30, 2022

Abstract

Exploiting two quasi-natural experiments, we find that firms increase emissions of toxic pollution following decreases in analyst coverage. The effects are stronger for firms with low initial analyst coverage, poor corporate governance and firms subject to less stringent monitoring by environmental regulators. Decreases in environmental-related questions raised in conference calls, an increased cost of monitoring to institutional shareholders, reductions in pollution abatement investment and the weakening of internal governance related to environmental performance are channels through which reduced analyst coverage contributes to increases in firm pollution. Our study highlights the monitoring role analysts play in shaping corporate environmental policies.

Keywords: financial analysts, corporate environmental policies, toxic pollution, external monitoring

Suggested Citation

Jing, Chenxing and Keasey, Kevin and Lim, Ivan and Xu, Bin, Analyst Coverage and Corporate Environmental Policies (November 30, 2022). Journal of Financial and Quantitative Analysis, Forthcoming, Leeds University Business School Working Paper No. 23-01, Available at SSRN: https://ssrn.com/abstract=4290087 or http://dx.doi.org/10.2139/ssrn.4290087

Chenxing Jing (Contact Author)

University of International Business and Economics ( email )

10 Huixindongjie, Chaoyang District
Beijing, 100029
China

Kevin Keasey

University of Leeds - Division of Accounting and Finance ( email )

Leeds LS2 9JT
United Kingdom
+44 (0)113 343 2618 (Phone)

Ivan Lim

Durham University ( email )

Millhill Lane
Durham DH1 3LB
United Kingdom

Bin Xu

University of Leeds ( email )

Leeds
United Kingdom

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