Ole-Kristian Hope
University of Toronto
Abstract: Financial analysts serve an important role as intermediaries between firms and investors. In this paper, I investigate factors associated with variations in analyst following using an international sample. Prior research has found that analyst coverage is positively associated with overall firm disclosure. I hypothesize and find that not all forms of disclosure are equally important to analysts. Specifically, controlling for firm- and country-level factors, I document that analyst following is more strongly associated with the extent of note disclosure than the comprehensiveness of the basic financial statements. I further find that analyst following is greater in environments with active IPO markets, suggesting that analysts value the potential for future revenues. Finally, I show that analyst following is negatively related to firm ownership concentration. This is consistent with concentrated ownership changing the nature of the agency problem and reducing the value of analyst-provided services.
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