Does Analyst Coverage Impede Long-Term Investments? Evidence from Health and Safety Programs

This paper studies the linkage between analyst coverage and Health and Safety (H&S) programs, which have started to emerge in U. S. firms to improve employee health and control healthcare expenditures. Given their homogeneity across firms, their well-documented profitability and long-term payoff...

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Bibliographic Details
Published in:Comptabilité Contrôle Audit 2021-05, Vol.27 (2), p.41-73, Article 41-73
Main Authors: Garel, Alexandre, Moussu, Christophe, Ohana, Steve, Petit-Romec, Arthur
Format: Article
Language:English
Subjects:
Capital expenditures
Costs
Earnings
Health care expenditures
Innovations
Investment
Investments
Investors
Occupational health
Personnel policies
Profitability
Profits
Quantitative Finance
Research & development expenditures
Safety programs
Social responsibility
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Summary:This paper studies the linkage between analyst coverage and Health and Safety (H&S) programs, which have started to emerge in U. S. firms to improve employee health and control healthcare expenditures. Given their homogeneity across firms, their well-documented profitability and long-term payoffs, H&S programs provide an interesting setting to revisit the effect of analyst coverage on long-term investments. We find a strong and negative association between analyst coverage and H&S programs. An instrumental variable approach suggests that the effect of analyst coverage is causal. Cross-sectional analysis indicates that the effect of analyst coverage is more pronounced for firms with a high cost of H&S programs relative to earnings, low blockholder ownership or low long-term investor ownership, and with a low distance of realized earnings to analysts' earnings forecasts. Overall, these results lend empirical support to the view that analyst coverage deters long-term investments in H&S programs by exerting pressure on managers to meet short-term earnings forecasts.
ISSN:1262-2788
2313-514X
DOI:10.3917/cca.272.0041