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

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  • Pandej Chintrakarn
  • Pornsit Jiraporn
  • Young Kim
  • Jang-Chul Kim

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.

Suggested Citation

  • Pandej Chintrakarn & Pornsit Jiraporn & Young Kim & Jang-Chul Kim, 2015. "Does corporate governance quality affect analyst coverage? Evidence from the Institutional Shareholder Services (ISS)," Applied Economics Letters, Taylor & Francis Journals, vol. 22(4), pages 312-317, March.
    • Handle: RePEc:taf:apeclt:v:22:y:2015:i:4:p:312-317
    DOI: 10.1080/13504851.2014.939372
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    Cited by:

    1. Shi, Huaizhi, 2024. "Managerial ownership and labor income share," Finance Research Letters, Elsevier, vol. 62(PB).
    2. Chintrakarn, Pandej & Jiraporn, Pornsit & Treepongkaruna, Sirimon & Mook Lee, Sang, 2022. "The effect of board independence on dividend payouts: A quasi-natural experiment," The North American Journal of Economics and Finance, Elsevier, vol. 63(C).
    3. He, Feng & Ding, Cong & Yue, Wei & Liu, Guanchun, 2023. "ESG performance and corporate risk-taking: Evidence from China," International Review of Financial Analysis, Elsevier, vol. 87(C).
    4. Farrukh Naveed & Muhammad Ishfaq & Zahid Maqbool, 2021. "The downside risk of mutual funds: Does the quality of corporate governance matter? Empirical evidence from Pakistan," Journal of Asset Management, Palgrave Macmillan, vol. 22(5), pages 376-388, September.
    5. Pandej Chintrakarn & Pornsit Jiraporn & Shenghui Tong & Napatsorn Jiraporn & Richard Proctor, 2020. "How do independent directors view corporate social responsibility (CSR)? Evidence from a quasi‐natural experiment," The Financial Review, Eastern Finance Association, vol. 55(4), pages 697-716, November.
    6. Tuan Ho & Duc N. Phung & Yen N. Nguyen, 2021. "State ownership and corporate risk‐taking: Empirical evidence in Vietnam," Australian Economic Papers, Wiley Blackwell, vol. 60(3), pages 466-481, September.

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