Featured Research

from universities, journals, and other organizations

Firms With High Analyst Coverage Engage In Excessive External Financing And Capital Spending, Study Finds

Date:
September 4, 2008
Source:
Wiley-Blackwell
Summary:
A new study explores whether abnormal analyst coverage influences the extent to which companies raise funds from external sources (e.g., issue bonds or sell stock) and the amount of new investments firms decide to undertake.

A new study in the journal Financial Management explored whether abnormal analyst coverage influences the extent to which companies raise funds from external sources (e.g., issue bonds or sell stock) and the amount of new investments firms decide to undertake.

John A. Doukas, Chansog Francis Kim, and Christos Pantzalis reviewed data on firms between 1980 and 2003 and used industry-adjusted metrics to measure excess analyst coverage.

Researchers found that abnormal analyst coverage plays an important role in explaining the firm’s external financing and capital spending. Results show that firms with high analyst coverage consistently engage in higher external financing than do their industry peers of similar size. Additionally, firms with high analyst coverage tend to have higher levels of investment than do firms with low analyst coverage.

They also find that firms with high analyst coverage, external financing, and capital spending realize lower future returns than do firms with low analyst coverage, external financing, and capital spending. They argue that this evidence suggests that the impact of analysts on a firm’s external financing and investment stems from excessive analyst coverage, which is a result of analysts’ self-interest and pressure to promote investment-banking transactions.

The authors conclude that their analysis shows that excessive coverage “tends to enhance the credibility of the information generated by analysts, which affects the investment decisions of existing and new investors.”


Story Source:

The above story is based on materials provided by Wiley-Blackwell. Note: Materials may be edited for content and length.


Journal Reference:

  1. Doukas et al. Do Analysts Influence Corporate Financing and Investment? Financial Management, 2008; 37 (2): 303 DOI: 10.1111/j.1755-053X.2008.00014.x

Cite This Page:

Wiley-Blackwell. "Firms With High Analyst Coverage Engage In Excessive External Financing And Capital Spending, Study Finds." ScienceDaily. ScienceDaily, 4 September 2008. <www.sciencedaily.com/releases/2008/09/080904151631.htm>.
Wiley-Blackwell. (2008, September 4). Firms With High Analyst Coverage Engage In Excessive External Financing And Capital Spending, Study Finds. ScienceDaily. Retrieved July 25, 2014 from www.sciencedaily.com/releases/2008/09/080904151631.htm
Wiley-Blackwell. "Firms With High Analyst Coverage Engage In Excessive External Financing And Capital Spending, Study Finds." ScienceDaily. www.sciencedaily.com/releases/2008/09/080904151631.htm (accessed July 25, 2014).

Share This




More Science & Society News

Friday, July 25, 2014

Featured Research

from universities, journals, and other organizations


Featured Videos

from AP, Reuters, AFP, and other news services

Mobile App Gives Tour of Battle of Atlanta Sites

Mobile App Gives Tour of Battle of Atlanta Sites

AP (July 25, 2014) Emory University's Center for Digital Scholarship has launched a self-guided mobile tour app to coincide with the 150th anniversary of the Civil War's Battle of Atlanta. (July 25) Video provided by AP
Powered by NewsLook.com
Beatings and Addiction: Pakistan Drug 'clinic' Tortures Patients

Beatings and Addiction: Pakistan Drug 'clinic' Tortures Patients

AFP (July 24, 2014) A so-called drugs rehab 'clinic' is closed down in Pakistan after police find scores of ‘patients’ chained up alleging serial abuse. Duration 03:05 Video provided by AFP
Powered by NewsLook.com
Too Few Teens Receiving HPV Vaccination, CDC Says

Too Few Teens Receiving HPV Vaccination, CDC Says

Newsy (July 24, 2014) The Centers for Disease Control and Prevention is blaming doctors for the low number of children being vaccinated for HPV. Video provided by Newsy
Powered by NewsLook.com
New Painkiller Designed To Discourage Abuse: Will It Work?

New Painkiller Designed To Discourage Abuse: Will It Work?

Newsy (July 24, 2014) The FDA approved Targiniq ER on Wednesday, a painkiller designed to keep users from abusing it. Like any new medication, however, it has doubters. Video provided by Newsy
Powered by NewsLook.com

Search ScienceDaily

Number of stories in archives: 140,361

Find with keyword(s):
Enter a keyword or phrase to search ScienceDaily for related topics and research stories.

Save/Print:
Share:

Breaking News:
from the past week

In Other News

... from NewsDaily.com

Science News

    Health News

      Environment News

        Technology News



          Save/Print:
          Share:

          Free Subscriptions


          Get the latest science news with ScienceDaily's free email newsletters, updated daily and weekly. Or view hourly updated newsfeeds in your RSS reader:

          Get Social & Mobile


          Keep up to date with the latest news from ScienceDaily via social networks and mobile apps:

          Have Feedback?


          Tell us what you think of ScienceDaily -- we welcome both positive and negative comments. Have any problems using the site? Questions?
          Mobile: iPhone Android Web
          Follow: Facebook Twitter Google+
          Subscribe: RSS Feeds Email Newsletters
          Latest Headlines Health & Medicine Mind & Brain Space & Time Matter & Energy Computers & Math Plants & Animals Earth & Climate Fossils & Ruins