DOES ANALYST COVERAGE PUT PRESSURE ON FIRMS TO INNOVATE? A STUDY BASED ON THE PERSPECTIVE OF PEER EFFECTS

This study aims to understand how corporate innovation is influenced by industry peers. Using panel data of Chinese listed firms from 2004 to 2019, we construct two-way fixed effect models to examine the peer effects in corporate innovation and the role of analyst coverage. The findings indicate a positive relationship between corporate innovation and industry-peer innovation. Under competitive pressure within the industry, firms tend to make similar innovation decisions to maintain their competitive advantage. Additionally, analyst coverage exerts pressure on firms and enhances peer effects in innovation. Using net analyst coverage as a proxy variable, we mitigate endogeneity concerns and find significant results. Finally, heterogeneity analysis shows firm size, ownership and profitability significantly influence the industry peer effect on innovation. This study clarifies the association between analyst coverage and industry peer effects in corporate innovation, offering insights for promoting and implementing innovative strategies.