Revisiting Analyst Coverage and Corporate Innovation : The Patent Value Perspective

How analyst coverage may affect corporate innovation remains unclear. We suggest that when the manager is myopic due to pressure from financial analysts and decides to reduce innovation, the firm should retain better innovation projects and forego worse projects. Accordingly, the average value of innovations improves. Empirically, we find that analyst coverage is positively correlated with patent value. We perform a difference-in-differences analysis and confirm our previous findings. Further, the positive effect of analyst coverage on patent value is lower for firms with more long-term projects and for firms with fewer patents per technology class