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Firms’ innovation strategy under the shadow of analyst coverage

Bing Guo, David Perez-Castrillo and Anna Toldrà-Simats

Journal of Financial Economics, 2019, vol. 131, issue 2, 456-483

Abstract: We study the effect of analyst coverage on firms’ innovation strategy and outcome. Using data of US firms from 1990 to 2012, we find evidence that an increase in financial analysts leads firms to cut research and development expenses, acquire more innovative firms, and invest in corporate venture capital. We attribute the first result to the effect of analyst pressure and the others to the informational role of analysts. We also find that financial analysts encourage firms to make more efficient investments related to innovation, which increases their future patents and citations and influences the novelty of their innovations.

Keywords: Financial analysts; Innovation; Corporate venture capital; Acquisition (search for similar items in EconPapers)
JEL-codes: G24 G34 O31 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

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Working Paper: Firms’ Innovation Strategy under the Shadow of Analyst Coverage (2017) Downloads
Working Paper: Firms' Innovation Strategy under the Shadow of Analyst Coverage (2017) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:131:y:2019:i:2:p:456-483

DOI: 10.1016/j.jfineco.2018.08.005

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