The Predictive Role of Analyst Coverage Intensity: Evidence from Cross-Listing in the US

This paper investigates financial analysts' predictive power of future performance and earnings quality, using a sample of firms cross-listed in the US. We find that analyst coverage is positively related to analysts' expectations about firms' future performance and negatively related to analysts' concern over firms' earnings quality. Country-level legal origin and disclosure index are two significant determinants of analyst coverage of cross-listed firms. In addition, the intensity of analyst coverage can predict future abnormal stock price performance. While documenting the substantial informational benefits to cross-listing, our study suggests that these benefits may not be complete since analysts appear to have predictive power and selectively provide coverage for firms with favorable future prospects.