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

@article{Derrien2013TheRE,
  title={The Real Effects of Financial Shocks: Evidence from Exogenous Changes in Analyst Coverage},
  author={F. Derrien and Ambrus Kecsk{\'e}s},
  journal={Journal of Finance},
  year={2013},
  volume={68},
  pages={1407-1440}
}
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… Expand
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