Analysts' initial coverage and stock price crashes

Initial analyst coverage significantly affects capital markets. This study used a sample of Chinese A-share listed companies from 2007 to 2020 to examine the impact of analysts' initial coverage on stock price crash risk. Analysts' initial coverage can reduce the risk of stock price crashes significantly. We removed “bear and bull market samples” using the two-stage least squares method and changed the indicators to measure stock price crashes, and the conclusions remained unchanged. Mechanism analysis showed that analysts' initial coverage can reduce stock price crash risk primarily due to the intermediary and supervisory effect mechanisms. The pressure effect and cater effect mechanisms were not significant. Compared with star analysts, the initial coverage of nonstar analysts was more significant in reducing stock price crash risk. When an analyst assesses a nonstar company, it can reduce the risk of a stock price crash. Analysts' initial coverage can reduce the risk of stock price crashes in the bear market. The relationship between analyst coverage and stock price crash risk was more pronounced in heavily polluting firms. The findings provide important insights for listed companies on reducing stock price crash risk.