Risk disclosure and analyst following:A study of French listed firms

In this study, we examine the effect of risk disclosure on the number of analysts following a firm using a sample of non financial and non utilities listed companies belonging to the 120 SBF index over the period 2007−2015. We also investigate the role that information asymmetry plays in this relationship. Our results show a positive and significant association between risk disclosure and analyst following, suggesting that firms providing higher risk disclosure attract more analysts, probably because of the low cost of gathering information on more transparent firms. However, a high degree of information asymmetry mitigates this positive effect, indicating that risk disclosure may not be a sufficient incentive for analyst following. Thus, although the analyst works as an information intermediary, the high information asymmetry seems to act as a burden making the cost of following those high risk disclosure firms outweighing the benefits associated with it.