The great sell-side sell-off: evidence of declining financial analyst coverage

Barry Hettler, Justyna Skomra, Arno Forst

Research output: Contribution to journalArticlepeer-review


Purpose: Motivated by significant global developments affecting the sell-side industry, in particular a shift toward passive investments and growing regulation, this study examines whether financial analyst coverage declined over the past decade and if any loss of analyst coverage is associated with a change in forecast accuracy. Design/methodology/approach: After investigating, and confirming, a general decline in analyst following, the authors calculate the loss of analyst coverage relative to the firm-specific maximum between 2009 and 2013. In multivariate analyses, the authors then examine whether this loss of coverage differs across geographic region, firm size and capital market development, and whether it is associated with consensus analyst accuracy. Findings: Results indicate that between 2011 and 2021, firm-specific analyst coverage globally declined 17.8%, while the decline in the EU was an even greater, 28.5%. Within the EU, results are most pronounced for small-cap firms. As a consequence of the loss of coverage, the authors observe a global decline in forecast accuracy, with EU small-cap firms and firms domiciled in EU non-developed capital markets faring the worst. Originality/value: This study is the first to document a concerning global decline in analyst coverage over the past decade. The study results provide broad-based empirical support for anecdotal reports that smaller firms in the EU and those in EU non-developed capital markets bear the brunt of consequences stemming from changes in the sell-side analyst industry.

Original languageEnglish (US)
Pages (from-to)290-305
Number of pages16
JournalAccounting Research Journal
Issue number2-3
StatePublished - May 24 2023

All Science Journal Classification (ASJC) codes

  • Accounting
  • Finance


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