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Does Analyst Coverage Impede Long-Term Investments? Evidence from Health and Safety Programs

Author

Listed:
  • Alexandre Garel
  • Christophe Moussu
  • Steve Ohana
  • Arthur Petit-Romec

Abstract

This paper studies the linkage between analyst coverage and Health and Safety (H&S) programs, which have started to emerge in U.S. firms to improve employee health and control healthcare expenditures. Given their homogeneity across firms, their well-documented profitability and long-term payoffs, H&S programs provide an interesting setting to revisit the effect of analyst coverage on long-term investments. We find a strong and negative association between analyst coverage and H&S programs. An instrumental variable approach suggests that the effect of analyst coverage is causal. Cross-sectional analysis indicates that the effect of analyst coverage is more pronounced for firms with a high cost of H&S programs relative to earnings, low blockholder ownership or low long-term investor ownership, and with a low distance of realized earnings to analysts? earnings forecasts. Overall, these results lend empirical support to the view that analyst coverage deters long-term investments in H&S programs by exerting pressure on managers to meet short-term earnings forecasts. JEL Classification: G24, G32, G34, M14

Suggested Citation

  • Alexandre Garel & Christophe Moussu & Steve Ohana & Arthur Petit-Romec, 2021. "Does Analyst Coverage Impede Long-Term Investments? Evidence from Health and Safety Programs," ACCRA, Association francophone de comptabilité, vol. 27(2), pages 41-73.
    • Handle: RePEc:cai:accafc:cca_272_0041
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    Cited by:

    1. Özgür, Arslan-Ayaydin & Thewissen, James & Torsin, Wouter, 2021. "Earnings Management Methods and CEO Political Affiliation," LIDAM Discussion Papers LFIN 2021017, Université catholique de Louvain, Louvain Finance (LFIN).

    More about this item

    Keywords

    analyst Coverage; investment; health and safety programs; corporate social responsibility;
    All these keywords.

    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility

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