Analyst Coverage and Stock Price Crashes

2011 ◽  
Author(s):  
Giuliano Iannotta ◽  
George G. Pennacchi
Keyword(s):  
Stock Price ◽  
Analyst Coverage

Analyst coverage, optimism, and stock price crash risk: Evidence from China

2013 ◽  
Vol 25 ◽  
pp. 217-239 ◽  
Author(s):  
Nianhang Xu ◽  
Xuanyu Jiang ◽  
Kam C. Chan ◽  
Zhihong Yi
Keyword(s):  
Stock Price ◽  
Crash Risk ◽  
Analyst Coverage

Effect of advertising expenditures on analyst coverage: evidence from an emerging market

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Omar Farooq ◽  
Harit Satt ◽  
Fatimazahra Bendriouch
Keyword(s):  
Stock Prices ◽  
Stock Price ◽  
Positive Impact ◽  
Emerging Market ◽  
Ordinary Least Squares ◽  
Information Asymmetries ◽  
Analyst Coverage ◽  
Content Type ◽  
The Impact ◽  
Advertising Activity

PurposeThis paper aims to document the relationship between advertising expenditures and analyst coverage in a sample of Indian firms during the period between 2000 and 2019.Design/methodology/approachIn order to test the effect of advertising expenditures on the extent of analyst coverage, the authors estimate various versions of pooled ordinary least squares (OLS) regression. The dependent variable (ANALYST) measures the total number of analysts covering a firm in a given year. The main independent variable of interest in this paper represents the advertising activity. The authors define the extent of advertising activity (ADVERT) as the ratio of total advertising expenditures and total assets.FindingsThe study’s results show that advertising expenditures have a significantly positive impact on the extent of analyst coverage and are robust across various proxies of the key variables and various estimation procedures.Practical implicationsThere are a number of key takeaways from our study. First, firms that expend more resources on advertising are more likely to be followed by analysts which is associated with better performance, lower information asymmetries associated and high advertising expenditures. Second, stock prices with more information embedded in them may signify that these firms receive more attention from investors and have lower information asymmetries. And finally the impact of advertising on the decision of an analyst to cover a firm becomes more pronounced for firms with high stock price synchronicity. All these three main conclusions are giving investors a clear insight on analyst coverage, advertising expenditure and the link between the two.Originality/valueThe results are consistent with the argument that advertising expenditures induces analysts to cover firms because firms with high advertising activities are more likely to have better performance, lower information asymmetries and increased attention from investors. All of these factors are supposed to facilitate the analyst coverage.

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