Analyst Coverage : Does the Listing Location Really Matter?

This study examines the impact of listing location, whether the stock is listed on the main board or the junior market of the London Stock Exchange, on the number of analysts following the stock. It also examines whether the determinants of analyst coverage can be conditional on listing location. We employ count panel regression methods that better suit the nature of a nonnegative integer dependent variable. Using a variation of Bhushan's (1989) model, we find that listing location has a significant positive association with analyst coverage. This indicates that stocks listed on the main board attract more analysts than can be explained by existing factors. The result holds even after including additional control variables. We further examine determinants of analyst coverage for the main market (FTSE350) and the alternative investment market (AIM) individually. We find that factors which explain the supply and demand functions of analyst services for stocks listed on the main board are different from those listed on the junior market. Importantly, pooling the stocks of these two markets together can mask significant differences and can give incorrect inferences about determinants of analyst coverage