What is the value of sell-side analysts? Evidence from coverage changes – A discussion

Li and You (this volume) study public firms’ common stock return reactions to two events: when analysts’ initiate coverage of the firm and when they terminate coverage. They test the returns for evidence of three sources of value added by analysts: (1) more monitoring of the firm, (2) reduced inform...

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Bibliographic Details
Published inJournal of accounting & economics Vol. 60; no. 2-3; pp. 58 - 64
Main Author Hansen, Robert S.
Format Journal Article
LanguageEnglish
Published Amsterdam Elsevier B.V 01.11.2015
Elsevier Sequoia S.A
Subjects
Common stock
Coverage initiation
Exogenous coverage termination
Financial analysts
Firm value
Information asymmetry
Information management
Investment trusts
Investor recognition
Knowledge management
Rates of return
Security analysts
Studies
Supply & demand
Terminations
Value added
Security analysts
Firm value
Information asymmetry
Investor recognition
G32
Coverage initiation
G14
Exogenous coverage termination
Financial analysts
G29
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Summary:Li and You (this volume) study public firms’ common stock return reactions to two events: when analysts’ initiate coverage of the firm and when they terminate coverage. They test the returns for evidence of three sources of value added by analysts: (1) more monitoring of the firm, (2) reduced information asymmetry about the firm, and (3) greater demand for the firm’s common stock. They find consistent support for analysts adding value by increasing demand, but not monitoring or by reducing information asymmetry. Their findings also indicate that analysts’ initiations supply little new information. I review these findings, put them in perspective with related research, and note research directions.
Bibliography:ObjectType-Article-1
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content type line 23
ISSN:0165-4101
1879-1980
DOI:10.1016/j.jacceco.2015.08.005