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The Real Effects of Financial Shocks: Evidence from Exogenous Changes in Analyst Coverage

Author

Listed:
  • François Derrien

    () (GREGH - Groupement de Recherche et d'Etudes en Gestion à HEC - HEC Paris - Ecole des Hautes Etudes Commerciales - CNRS - Centre National de la Recherche Scientifique)

  • Ambrus Kecskés

    (Schulich School of Business, York University - York University [Toronto])

Abstract

We study the causal effects of analyst coverage on corporate investment and financing policies. We hypothesize that a decrease in analyst coverage increases information asymmetry and thus increases the cost of capital; as a result, firms decrease their investment and financing. We use broker closures and broker mergers to identify changes in analyst coverage that are exogenous to corporate policies. Using a difference-in-differences approach, we find that firms that lose an analyst decrease their investment and financing by 1.9% and 2.0% of total assets, respectively, compared to similar firms that do not lose an analyst.

Suggested Citation

  • François Derrien & Ambrus Kecskés, 2013. "The Real Effects of Financial Shocks: Evidence from Exogenous Changes in Analyst Coverage," Post-Print hal-00852356, HAL.
  • Handle: RePEc:hal:journl:hal-00852356
    DOI: 10.1111/jofi.12042
    Note: View the original document on HAL open archive server: https://hal-hec.archives-ouvertes.fr/hal-00852356
    as

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