The coverage decisions of financial analysts for corporations are mainly determined by the relative costs and benefits. Analysts will never include the less-covered stocks on their lists unless they think it’s worth it for doing so. This research intends to study whether the analysts report differently when initiating their coverage for the less-covered stocks and the well-followed stocks and how the market reactions to the analyst reports. The results show that analysts release more positive research reports for the less-covered stocks, and the market reacts favorably to this positive information. In addition, our results show that the less-covered stocks gradually increase their firm value, resulting from the improvement in liquidity. Furthermore, there is a positive relationship between the firm ages and their long-run stock performance for coverage initiation.
