Document Type

Article

Publication Date

2008

DOI

10.1111/j.1755-053X.2008.00014.x

Publication Title

Financial Management

Volume

37

Issue

2

Pages

303-339

Abstract

We examine whether abnormal analyst coverage influences the external financing and investment decisions of the firm. Controlling for self-selection bias in analysts' excessive coverage, we find that firms with high (low) analyst coverage consistently engage in higher (lower) external financing than do their industry peers of similar size. Our evidence also demonstrates that firms with excessive analyst coverage overinvest and realize lower future returns than do firms with low analyst coverage. Our findings are consistent with the hypothesis that analysts favor the coverage of firms that have the potential to engage in profitable investment-banking business.

Comments

Web of Science: "Free full-text from publisher."

Original Publication Citation

Doukas, J. A., Kim, C., & Pantzalis, C. (2008). Do analysts influence corporate financing and investment? Financial Management, 37(2), 303-339. doi:10.1111/j.1755-053X.2008.00014.x

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