This study reveals the critical role of financial analysts in enhancing the information environment of innovative firms following the strengthening of intellectual property rights (IPR) protection. Leveraging staggered rollouts of specialized Intellectual Property (IP) tribunals in China as exogenous shocks, we find that stronger IPR protection prompts financial analysts to shift attention from non-innovative to innovative firms, improving innovative firms’ information environment (higher forecast accuracy, lower bid-ask spreads). Further, the reallocation is driven by innovative firms’ better prospects, more patent disclosures, and higher investor demand. Finally, analysts who increase their attention to affected innovative firms are more likely to attain star status.
Shu et al. (Mon,) studied this question.