Product Market Competition and Analyst Coverage Decisions

We analyze whether product market competition is an important factor in analyst coverage decisions and whether analysts benefit from covering product market competitors. We find that analysts are more likely to cover a firm When this firm competes with and offers more similar products to the firms already covered by the analyst. We also find that analysts who cover product market competitors are more likely to obtain star status and issue more informative recommendations. Collectively, these results are consistent with the importance of industry and product market knowledge obtained through covering product market competitors to analysts.