Abstract
ABSTRACT This study investigates the influence of analyst coverage on corporate leverage adjustment (CLA) in China. We analyzed 26,673 firm-year observations from the Shanghai and Shenzhen stock exchanges from 2000 to 2020 and found that analyst coverage had a negative impact on CLA, which was stronger in firms with poor performance. We posit that analyst forecast divergence and pressure-induced managerial myopia are possible mechanisms through which analyst coverage influences CLA. Our study contributes to the dynamic trade-off model literature by demonstrating that analyst coverage is also a determinant of CLA. Furthermore, our findings help regulators and investors to comprehensively understand the role of analysts in emerging markets.
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