How do Analyst Recommendations Affect Firm Competitive Actions? A Rival-Centric View

Drawing on the research of competitive dynamics and financial analysts, we link analysts’ stock recommendation to firms’ competitive behaviors and investigate how analyst recommendations on the focal firm’s stock and analysts recommendation on the rivaling firms’ stock individually and interactively shape the firm’s competitive behaviors. Based on a longitudinal analysis of 2,319 public firms from 2000 to 2015, we show that both analyst stock recommendations of the focal firms and of rivaling firms can enhance the focal firms’ strategic repertoire intensity and complexity. Moreover, analyst recommendations of the focal firms’ stocks can weaken the positive effect of analyst stock recommendations of the rivals on the focal firms’ strategic repertoire intensity. Our study contributes to both the competitive dynamics and analyst research by taking a rival-centric view to highlight analyst recommendations on rivaling firms’ stocks as important information to shape the focal firm’s competitive strategy.