Alternative Title
How do analysts affect corporate innovation: Evidence from site visits
Publication Type
Working Paper
Version
submittedVersion
Publication Date
2-2022
Abstract
While prior studies examine whether analyst coverage affects corporate innovation, there is little research on the mechanism through which financial analysts affect corporate innovation. In this paper, we examine whether and how analysts’ questions about innovation affect corporate innovation activities and outcomes. Using a sample of corporate site visits in China, we find that when analysts ask questions about innovation during site visits, the firms invest more in research and development and file more patent applications in the future. This association is stronger when analysts have a greater information and monitoring role. In addition, consistent with knowledge diffusion between firms, analysts’ questions have a stronger effect when there is more technical spillover potential in the industry. However, the effect is weakened when managers feel pressure to reduce investment in innovation to meet capital markets’ earnings expectations. Overall, we provide evidence that analysts play a direct role in corporate innovation through their questioning of firms’ innovation activities.
Keywords
Analyst coverage, site visits, innovation, R&D expenditures
Discipline
Accounting | Corporate Finance | Technology and Innovation
Research Areas
Corporate Reporting and Disclosure
First Page
1
Last Page
52
Citation
CHENG, Qiang; WANG, Yutao; YANG, Holly I.; and ZHANG, Zheyuan.
Analysts' site visits and corporate innovation. (2022). 1-52.
Available at: https://ink.library.smu.edu.sg/soa_research/2012
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Comments
Presented at IIMB, 2022 March 4