Does corporate governance quality affect analyst coverage? Evidence from the Institutional Shareholder Services (ISS)

Pandej Chintrakarn, Pornsit Jiraporn, Young Kim, Jang Chul Kim

Research output: Contribution to journalArticlepeer-review

3 Scopus citations

Abstract

We examine the impact of corporate governance quality on the extent of analyst coverage. The evidence based on nearly 3000 firms indicates that more analysts are likely to cover firms with weaker corporate governance. In particular, as corporate governance quality falls by one SD, analyst following increases by 11.40%. Our evidence is consistent with the notion that poor governance results in a wider divergence between the stock’s market price and the fundamental value. Analysts prefer to cover companies with poor governance because it allows them to generate trading commissions by offering shareholders a particularly compelling story about why a stock’s fundamental value and the current price differ.

Original languageEnglish (US)
Pages (from-to)312-317
Number of pages6
JournalApplied Economics Letters
Volume22
Issue number4
DOIs
StatePublished - Mar 4 2015

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics

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