Graduation Semester and Year
2016
Language
English
Document Type
Dissertation
Degree Name
Doctor of Philosophy in Accounting
Department
Accounting
First Advisor
Bin Srinidhi
Second Advisor
Ramgopal Venkataraman
Abstract
In this study, I investigate the impact of analyst coverage changes on firms’ subsequent firm-specific crash risk. Using a sample of 24,228 firm-year observations from 2000 to 2013, I show that changes in analyst coverage are negatively associated with changes in one-year-ahead crash risk. This result is consistent with analysts’ information gathering activities and analyses limiting bad news hoarding behavior, and is generally inconsistent with analyst pressure leading to more bad news hoarding by managers. Moreover, I find the negative association between coverage changes and changes in subsequent crash risk to be more pronounced when the coverage change is attributable to Institutional Investor All-Star analysts. This supports my conjecture that a combination of skills, information acquisition advantages, and reputation allows star analysts to more efficiently disseminate information to the market and reduce the likelihood of future crashes for the firms they cover than their non-star counterparts. My findings are robust to the use of alternative measures of crash risk and after controlling for potential endogeneity. Finally, consistent with the argument that both the investors’ demands for analyst coverage and the value analysts can provide through their information acquisition should increase with firm-specific risk, I document a positive association between prior firm-specific crash risk and analyst coverage for the firms. My findings also suggest that star and non-star analysts have distinct decision models and choose what firms to cover based on different factors.
Keywords
Crash risk, Financial analyst, All-star analyst, Analyst coverage, Information asymmetry
Disciplines
Accounting | Business
License
This work is licensed under a Creative Commons Attribution 4.0 International License.
Recommended Citation
Yvonne, I-Fang Lee, "Analyst Coverage and Stock Price Crash Risk" (2016). Accounting Dissertations. 42.
https://mavmatrix.uta.edu/accounting_dissertations/42
Comments
Degree granted by The University of Texas at Arlington