All Eyes on Me: The Impact of Analyst Coverage on Foreign Subsidiary Establishment Decision

Abstract

This study investigates how financial analyst coverage influences firms’ internationalization strategies, focusing specifically on the decision to establish foreign subsidiaries. While prior research has explored various organizational responses to analyst-induced pressures, the role of international expansion as a coping mechanism remains underexplored. Drawing on a panel dataset of U.S.-listed multinational enterprises from 2011 to 2020, this study finds that increased analyst coverage is positively associated with foreign subsidiary establishment, suggesting that firms may use internationalization to navigate institutional scrutiny, signal long-term growth, and diversify risk. Furthermore, the effect of analyst coverage is conditioned by two critical internal factors: CEO compensation and negative performance feedback. Firms led by highly compensated CEOs are less responsive to analyst scrutiny, reflecting a risk-averse orientation driven by gain-framed decision-making. In contrast, firms experiencing negative performance feedback are more likely to internationalize when faced with high analyst attention, viewing foreign expansion as a means to restore legitimacy and reshape investor perceptions.

Keywords: analyst, internationalization, CEO compensation, performance feedback