Institutional Logics; Agency Theory; Family Firms; Analyst Coverage; Comparative Corporate Governance;
How do analysts make decisions about which firms to cover? Previous research has not considered how such decisions can be influenced by cultural understandings about appropriate forms of corporate governance. Drawing upon the institutional logics perspective, the authors propose that analyst firms’ home-country institutional logics of corporate governance can shape analyst perception of coverage risks for family firms.Specifically, they argue that given the negative view towards family governance in shareholder-based logic, family firms are less likely to be covered by analyst firms from shareholder-based countries than by those from stakeholder-based countries. Furthermore, the coverage divergence between shareholder- and stakeholder-based analyst firms will be greater for family firms featuring higher risks of value assessment and expropriation.The authors test their framework in the context of global analysts’ coverage of publicly listed firms in Taiwan between 1996 and 2005 and find empirical support. This study contributes to the institutional logics perspective by establishing the implications of corporate governance logics for analyst coverage and providing a boundary condition for agency theory. The authors also uncover a less-noted source of institutional variation among the analyst community.