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Who Gets Wall Street’s Attention? How Alliance Announcements and Alliance Density Affect Analyst Coverage

University of Michigan, USAmichjen{at}umich.edu

This study integrates research on strategic alliances and security analysts by focusing on the extent to which alliance announcements affect the amount of coverage firms obtain from security analysts. Adopting the perspective that alliance announcements constitute important market signals, I argue that they increase analyst coverage at a decreasing rate, but also that the strength of the relationship between announcements and coverage depends on the density of alliances. The relationship is strongest when alliance density is low because more attractive alliance partners are available, or when alliance density is high because more attractive resources are available in the alliance network. I find support for these arguments in the empirical context of alliance announcements among computer technology firms and discuss their consequences for research on alliance-based market signals.

Key Words: alliances • analysts • market signals

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