Get 20M+ Full-Text Papers For Less Than $1.50/day. Start a 14-Day Trial for You or Your Team.

Learn More →

Financial analyst coverage for U.S. firms facing foreign competition: Evidence from trade liberalization

Financial analyst coverage for U.S. firms facing foreign competition: Evidence from trade... This study examines financial analyst coverage for U.S. firms following an increase in foreign product market competition. To capture exogenous shocks to domestic firms' competitive environments, we exploit a quasi‐natural experiment from large import tariff reductions over the 1984 to 2005 period in the manufacturing sector. Using data for the years before and after large tariff reductions, our difference‐in‐differences analysis shows evidence of a significant decrease in analyst coverage for incumbent U.S. firms when they face greater entry threat from foreign competitors. We also find that analysts with less firm‐specific experience and less accurate prior‐period forecasts are more likely to stop following the domestic firm when foreign competition intensifies. Overall, the findings suggest that foreign product market competition from global trade liberalization is an important determinant of financial analysts' coverage decisions. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of International Financial Management & Accounting Wiley

Financial analyst coverage for U.S. firms facing foreign competition: Evidence from trade liberalization

Download PDF
30 pages

Loading next page...
 
/lp/wiley/financial-analyst-coverage-for-u-s-firms-facing-foreign-competition-I6oQIa0pn2

References (86)

Publisher
Wiley
Copyright
Copyright © 2020 John Wiley & Sons Ltd
ISSN
0954-1314
eISSN
1467-646X
DOI
10.1111/jifm.12111
Publisher site
See Article on Publisher Site

Abstract

This study examines financial analyst coverage for U.S. firms following an increase in foreign product market competition. To capture exogenous shocks to domestic firms' competitive environments, we exploit a quasi‐natural experiment from large import tariff reductions over the 1984 to 2005 period in the manufacturing sector. Using data for the years before and after large tariff reductions, our difference‐in‐differences analysis shows evidence of a significant decrease in analyst coverage for incumbent U.S. firms when they face greater entry threat from foreign competitors. We also find that analysts with less firm‐specific experience and less accurate prior‐period forecasts are more likely to stop following the domestic firm when foreign competition intensifies. Overall, the findings suggest that foreign product market competition from global trade liberalization is an important determinant of financial analysts' coverage decisions.

Journal

Journal of International Financial Management & Accounting – Wiley

Published: Jun 1, 2020

Keywords: ; ; ; ;

There are no references for this article.