Does Analyst Coverage Encourage Firm Innovation? Evidence from Korea

This paper examines whether analyst coverage affects firm innovation in an economy dominated by family-controlled business groups. Using a sample of Korean publicly traded firms from 2010 to 2018, we find that an increase in financial analysts leads covered firms to cut investments in corporate vent...

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Bibliographic Details
Published inSeoul Journal of Business Vol. 27; no. 2; pp. 73 - 117
Main Authors Kim, Woojin, Choy, Yoonyoung
Format Journal Article
LanguageEnglish
Published Seoul Seoul National University, College of Business Administration 01.12.2021
경영연구소
Subjects
Bias
Corporate governance
Emerging markets
Estimates
Innovations
Investments
Public companies
R&D
Research & development
Venture capital
경영학
United States > US
Online AccessGet full text
ISSN1226-9816
DOI10.35152/snusjb.2021.27.2.003

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Summary:This paper examines whether analyst coverage affects firm innovation in an economy dominated by family-controlled business groups. Using a sample of Korean publicly traded firms from 2010 to 2018, we find that an increase in financial analysts leads covered firms to cut investments in corporate venture capital and R&D. Moreover, reduction in innovation through acquisitions is more pronounced when analysts are from chaebol (family-controlled large business group) affiliated brokerages. These findings suggest that unlike in U.S., analyst coverage puts pressure on managers to meet the analysts forecasts, thereby impeding innovation under such environment.
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ISSN:1226-9816
DOI:10.35152/snusjb.2021.27.2.003