Abstract
We investigate three potential channels of analyst value creation: improving fundamental performance through monitoring, reducing information asymmetry, and increasing investor recognition. We show that changes in investor recognition have consistent explanatory power for the market reaction to coverage initiations and terminations but find mixed evidence for changes in information asymmetry and no evidence for changes in fundamental performance as determinants of the market reaction. These results suggest that analysts create value for firms under their coverage by improving their investor recognition and not by monitoring or reducing information asymmetry.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
