Analyst Coverage Networks and Corporate Financial Policies

Armando Gomes (), Radhakrishnan Gopalan, Mark T. Leary () and Francisco Marcet ()
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Armando Gomes: Olin Business School, Washington University in St. Louis, St. Louis, Missouri 63130
Mark T. Leary: Olin Business School, Washington University in St. Louis, St. Louis, Missouri 63130; National Bureau of Economic Research, Cambridge, Massachusetts 02138
Francisco Marcet: School of Economics and Business, University of Chile, Santiago 8330015, Chile

Management Science, 2024, vol. 70, issue 8, 5016-5039

Abstract: We use the setting of analyst coverage networks to shed light on the nature of peer effects in financial policies. First, we use the “friends-of-friends” approach and exploit the fact that analyst coverage networks partially overlap to identify endogenous peer effects, in which firms respond directly to the capital structure choices of their peers, separately from contextual effects, in which they respond to their peers’ characteristics. We further show evidence that analysts facilitate these peer effects through their role as informational intermediaries. Analyst network peer effects are distinct from industry peer effects and are more pronounced among peers connected by analysts that are more experienced and from more influential brokerage houses. Finally, the analyst peer effects become weaker after exogenous reductions in common coverage as a consequence of brokerage closures.

Keywords: analyst network; friends of friends; peer effects; equity shock; capital structure (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:70:y:2024:i:8:p:5016-5039

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