15508: When the Oracle Falls Silent – Brokerage Closures and Competitive Threats (session 25747)

This paper examines how analyst coverage shapes the competitive threats firms face from rivals. Using the awareness-motivation-capability (AMC) framework, we argue that analysts act as key information intermediaries, helping rivals understand and interpret a focal firm’s strategy and market position. When analyst coverage decreases due to brokerage house closures or mergers, rivals lose access to critical insights, leading to fewer competitive actions against the firm. We further explore the boundary conditions under which this effect is more pronounced, focusing on two factors: the focal firm’s dynamism and its corporate disclosure volume. Dynamic firms or those with extensive disclosures are particularly impacted when analyst coverage declines, as rivals depend heavily on analysts to make sense of their strategic moves. We leverage a natural experiment combined with a difference-in-difference approach to establish causal relationships. The findings provide robust support to our hypotheses. This study bridges research on analyst coverage and competitive dynamics, highlighting the importance of interpretation in interfirm rivalry and the broader impact of financial analysts.

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