Analyst Coverage and Corporate Environmental Policies

Exploiting two quasi-natural experiments, we find that firms increase emissions of toxic pollution following decreases in analyst coverage. The effects are stronger for firms with low initial analyst coverage, poor corporate governance, and firms subject to less stringent monitoring by environmental...

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Bibliographic Details
Published in:Journal of financial and quantitative analysis 2024-06, Vol.59 (4), p.1586-1619
Main Authors: Jing, Chenxing, Keasey, Kevin, Lim, Ivan, Xu, Bin
Format: Article
Language:English
Subjects:
Analysts
Companies
Corporate governance
Costs
Environmental management
Environmental performance
Environmental policy
Environmental protection
Institutional investments
Pollution
Pollution control
Quantitative analysis
Stockholders
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Summary:Exploiting two quasi-natural experiments, we find that firms increase emissions of toxic pollution following decreases in analyst coverage. The effects are stronger for firms with low initial analyst coverage, poor corporate governance, and firms subject to less stringent monitoring by environmental regulators. Decreases in environmental-related questions raised in conference calls, an increased cost of monitoring to institutional shareholders, reductions in pollution abatement investment, and the weakening of internal governance related to environmental performance are channels through which reduced analyst coverage contributes to increases in firm pollution. Our study highlights the monitoring role analysts play in shaping corporate environmental policies.
ISSN:0022-1090
1756-6916
DOI:10.1017/S0022109023000340