Abstract:

This paper studies the role of analyst specialization in the resource allocation of diversified firms. We show that minor segments of conglomerates are less likely to be covered by industry specialists compared to standalone firms and the major segment of conglomerates. Moreover, segment investment sensitivity to industry q varies with analysts’ industry specialization. We further explore a within-firm, exogenous shock on analyst specialization and find that investment decreased for segments that lost specialized analysts’ coverage relative to those that did not lose analyst following and those that lost only unspecialized analysts. Our evidence suggests that expert (under-)coverage has real effects on the investment (in)efficiency of conglomerates.

General information:

Attendance to this seminar is possible by invitation only. Please send an e-mail to finsec-abs@uva.nl if your are interested in attending this seminar.