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The impacts of performance relative to analyst forecasts and analyst coverage on firm R&D intensity

Author

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  • Richard J Gentry
  • Wei Shen

Abstract

Taking an agency theory perspective of managers as risk averse and self‐interest seeking and focusing on externally generated analyst forecasts as the performance target, we propose that managers tend to cut R&D expenses when they are under pressure to meet analyst forecasts, especially when they face an increase in employment risk after missing the forecasts. We further argue that analyst coverage can serve as an external monitoring mechanism to help contain this agency problem. We test these arguments with data from a sample of U.S. manufacturing firms during the period of 1979 to 2005. Copyright © 2012 John Wiley & Sons, Ltd.

Suggested Citation

  • Richard J Gentry & Wei Shen, 2013. "The impacts of performance relative to analyst forecasts and analyst coverage on firm R&D intensity," Strategic Management Journal, Wiley Blackwell, vol. 34(1), pages 121-130, January.
    • Handle: RePEc:bla:stratm:v:34:y:2013:i:1:p:121-130
    DOI: 10.1002/smj.1997
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    Cited by:

    1. Zhang, Zhida & Ruan, Peiheng & Wang, Yuetang, 2025. "Does stock market liberalization restrain corporate misconduct: Evidence from research and development manipulation," International Review of Financial Analysis, Elsevier, vol. 106(C).
    2. Xinchun Wang & Anna Shaojie Cui, 2025. "The impact of analyst stock recommendations on firms’ relative exploration orientation," Journal of the Academy of Marketing Science, Springer, vol. 53(4), pages 1157-1183, July.
    3. Wang, Duo & Li, Yanxi & Hao, Zihan, 2025. "Adjustment of the presentation format of R&D expense and analyst forecasts," Finance Research Letters, Elsevier, vol. 86(PF).
    4. Jiaoliang Jiang & Hengmiao Bao & Shijie Yang, 2025. "The effect of shareholder pressure on stakeholder interests: Evidence from corporate tax avoidance," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 30(3), pages 2492-2513, July.
    5. Xiao, Shengpeng & Wu, Kedong & Xiao, Xiao & Lin, Changqing, 2025. "How do data assets affect firm investment?," International Review of Financial Analysis, Elsevier, vol. 106(C).
    6. He Li & Clas Wihlborg, 2026. "A renewed examination of how trade secret protection affects innovation: evidence from the inevitable disclosure doctrine," Journal of Regulatory Economics, Springer, vol. 69(1), pages 1-37, December.
    7. Yichen Wang & Christopher Marquis, 2025. "Does Product Market Competition Promote or Reduce Firms’ Corporate Social Responsibility Behavior? How Stakeholder Attention Shapes Responsiveness to Stakeholders," Journal of Business Ethics, Springer, vol. 200(4), pages 867-896, September.
    8. Raimo, Nicola & L'Abate, Vitiana & Vitolla, Filippo & Salvi, Antonio & Petruzzella, Felice, 2026. "Closing the loop on forecasts: Circular economy disclosure via social media platforms and analyst forecast quality," Technology in Society, Elsevier, vol. 84(C).
    9. de la Fuente, Gabriel & Ortiz, Margarita & Velasco, Pilar, 2025. "Business diversification and ESG engagement: Riding tandem to risk reduction and value creation?," Journal of Business Research, Elsevier, vol. 200(C).
    10. Alipour, Ali & Goudarzi, Kamyar & Ateş, Nüfer Yasin & Gözübüyük, Remzi & Genç, Mehmet, 2025. "Performance feedback, performance prospects, and firm search behavior: the role of institutional settings," Journal of Business Research, Elsevier, vol. 200(C).
    11. Quan, Siying & Cheng, Peng & Zhai, Jia, 2025. "Supply network centrality and ESG performance: A resource dependence perspective," Finance Research Letters, Elsevier, vol. 79(C).

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