The Impact of Coverage Initiations: Do Swedish Small Cap Firms Benefit From Analyst Coverage?

Sammanfattning: This study analyzes the value impact of coverage initiations on Swedish small cap firms by looking at stock price reactions and change in liquidity for firms where a commission-based analyst coverage is initiated during the period 2015-2019. The study is a partial replication and extension of Dhiensiri and Sayrak's (2010) paper ''The Value Impact of Analyst Coverage'' and has been performed using an event study methodology, including ordinary least square regressions, to calculate normal returns and estimate abnormal returns during a period around the publication of the coverage initiation. A significant stock price reaction was observed for the sample stocks on the publication day and the liquidity increased. Hence, coverage initiations seem to have a value to the firms being covered. This is, to our knowledge, the first study that focuses on coverage initiations on Swedish listed firms in general and small cap firms in particular. Thus, it can provide a more comprehensive and complete picture of the impact of coverage initiations.