Different from existing evidence that analyst coverage is shaped by various financial and nonfinancial factors, we fill the gap in the literature by shedding light on how analysts react to value-relevant alternative data, which confirms the governance effect of alternative data disclosure from a new perspective.We utilize the commercial availability of third-party online sales data from WTF after 2018 as an exogenous information shock. In 2018, WTF launched a dataset that included online sales data for nearly 200 listed firms collected from China's leading third-party e-commerce platforms, such as Taobao, T-mall, JD.com, etc. The launch of this dataset has made previously private online sales data public, greatly reducing such information's acquisition costs. This shock enables our use of a difference-in-differences (DID) approach. The treatment firms are those included in the online sales dataset WTF launched in 2018, and the others are the control firms. We then compare the changes in firm-specific analyst following for the treatment firms before and after 2018, relative to the control firms.We find that treatment firms attract more analysts following the pre-2018 to post-2018 periods than the control firms. This suggests that the third-party online sales disclosure significantly increased affected firms' analyst following. The result remains robust after controlling online sales percent, utilizing the propensity score matching (PSM) method, implementing the Heckman two-stage model, conducting falsification tests and examining parallel trend assumptions. Channel tests suggest that efficient information processing, an improved internal information environment, accurate forecast and more social attention are the underlying mechanisms through which the aggregate release of third-party online sales data helps attract analyst following. Moreover, the main result is more pronounced among firms with higher online sales percent, CEO and chairman duality and less individual investor interactions.First is the contribution to the literature on alternative data and online sales data. There is extensive evidence on how various alternative data affect different market participant behaviors. Yet, little research focuses on the unique online sales data from China. This paper fills the gap by studying how the aggregate release of online sales data influences analyst following from the perspective of the supply of and demand for analyst services. The second contribution relates to the factors that affect analyst following decisions. There is a wealth of literature providing evidence from firm characteristics, individual analyst attributes and other institutional factors, whereas the research focusing on alternative data is still limited even with the fact that this novel alternative data source is embedded with high information value and outperforms traditional financial information in many ways. This paper underscores that alternative data disclosure can affect analyst following through the benefit-cost tradeoff.
