Do Analysts Cater to Investor Information Demand?

This paper investigates whether analysts cater their coverage to investor demand, and tests whether analysts cater their coverage more towards retail or institutional investors. Results suggest that analysts’ coverage is positively associated with investor demand; analyst following significantly increases in firms which have more retail and institutional information demand. Furthermore, results suggest that analysts cater their coverage more towards institutional investors, as compared to retail investors. Results are consistent across various robustness checks. These results suggest that analysts focus their coverage on companies which have garnered the most interest from investors, thus potentially maximizing the utility of the information they disseminate. JEL: G14; G23; G24; G29