Cover Me: Managers’ Response to Decreases in Analyst Coverage

We show that managers increase the volume of public financial guidance in response to decreases in analyst coverage of their firms. This result is driven by the post-Regulation Fair Disclosure period, and is stronger for firms with higher sales growth and firms with lower resulting levels of coverage. On the other hand, managers’ guidance response to increases in analyst coverage is generally smaller and less significant. Our results suggest that managers perceive analyst coverage to be valuable and that they expend resources to attract and maintain a certain level of analyst coverage.