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How do financial analysts’ recommendations affect firm competitive actions? A rival-centric view

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  • Lien, Wan-Chien
  • Chen, Tianxu
  • Chen, Jianhong
  • Sohl, Jeffrey E.

Abstract

Drawing on the research of competitive dynamics and financial analysts, we investigate how financial analysts’ recommendations of rivals’ stocks drive a focal firm’s competitive actions. Based on a longitudinal analysis of 2282 public firms from 2000 to 2015, we show that the more positive analysts’ recommendations of rivals’ stocks, the greater the intensity and complexity, but the less the deviation from industry norms, of a focal firm’s competitive repertoire. We also find that these relationships are weakened by analysts’ positive recommendations of the focal firm’s own stocks. Our study contributes to both the competitive dynamics and financial analyst research by taking a rival-centric view to study the link between financial analysts’ recommendations and interfirm rivalry.

Suggested Citation

  • Lien, Wan-Chien & Chen, Tianxu & Chen, Jianhong & Sohl, Jeffrey E., 2021. "How do financial analysts’ recommendations affect firm competitive actions? A rival-centric view," Journal of Business Research, Elsevier, vol. 134(C), pages 531-539.
    • Handle: RePEc:eee:jbrese:v:134:y:2021:i:c:p:531-539
    DOI: 10.1016/j.jbusres.2021.05.046
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    References listed on IDEAS

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    Cited by:

    1. Zhang, Ping & Wang, Yiru, 2023. "The bright side of analyst coverage on corporate innovation: Evidence from China," International Review of Financial Analysis, Elsevier, vol. 89(C).
    2. Hennig, Jan C. & Oehmichen, Jana & Steinberg, Philip J. & Heigermoser, Judith, 2022. "Determinants of common ownership: Exploring an information-based and a competition-based perspective in a global context," Journal of Business Research, Elsevier, vol. 144(C), pages 690-702.

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