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

Alexandre Garel, Christophe Moussu, Steve Ohana and Arthur Petit-Romec

ACCRA, 2021, vol. 27, issue 2, 41-73

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

Keywords: analyst Coverage; investment; health and safety programs; corporate social responsibility (search for similar items in EconPapers)
JEL-codes: G24 G32 G34 M14 (search for similar items in EconPapers)
Date: 2021
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