Does competition in product markets affect the value of analyst coverage? Evidence from an emerging market

Abstract

PurposeThis paper aims to document the impact of product market competition on the value of analyst coverage.Design/methodology/approachThis paper uses variety of estimation techniques (panel regression as well as the quantile regression approaches) and the data for nonfinancial firms from India to document the impact of product market competition on the value of analyst coverage during the period between 2001 and 2018.FindingsThe findings show that the value of analyst coverage is an increasing function of product market competition. The authors argue that better information environment associated with firms operating in industries with high competition improves the quality of research done by analysts, thereby increasing the value of analyst coverage. The study results are consistent across different subsample and remain quantitatively the same when the authors use alternate estimation procedures.Originality/valueThe paper provides evidence regarding the role played by product market competition – a publicly available measure – on the value of research produced by analysts within the context of emerging markets.