The impact of analyst coverage and stock price synchronicity: Evidence from brokerage mergers and closures✰

Abstract

We examine the impact of analyst coverage on stock price synchronicity using exogenous shocks of brokerage mergers and closures in a sample of Chinese firms. This approach effectively mitigates endogeneity between analyst coverage and stock price synchronicity. Our findings suggest that after brokerage mergers and closures, the reduced analyst coverage leads to a decrease in stock price synchronicity by using a difference-in-differences research design. Hence, greater analyst coverage likely only produces market-wide rather than firm-specific information in emerging markets.