On the marketing effect of financial analysts: evidence from investor bids in SEO auctions

Mingjing Yang, Xiaoke Cheng, Jenny Xinjiao Guan, Shenghao Gao*, Jia Liu

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review


This study investigates the marketing effect of financial analyst in seasoned equity offering (SEO) auctions and how this influences the price elasticity and sales of stocks. Analyzing detailed investor bids in China, we find that a greater marketing effort of financial analysts leads to increased investor demand, higher demand elasticities, and lower discounts in SEO auctions. These results are validated by utilizing estimated residual analyst reports, 2SLS estimation and alternative measures of analyst marketing effort. Further, we adopt a causal steps approach, confirming that a financial analyst increases investor demand by broadening the investor base and demand elasticity by reducing differences of opinion among investors. Our findings demonstrate that financial analysts play a marketing role in financial markets in addition to information gathering and monitoring. Our study provides novel evidence of an underlying mechanism driving the negative relationship between financial analysts and SEO discounts and offers practical insights into market regulation and monitoring.

Original languageEnglish
Pages (from-to)408-428
Number of pages21
JournalInternational Review of Economics and Finance
Early online date7 Jul 2023
Publication statusPublished - 1 Nov 2023


  • Analyst coverage
  • Demand elasticity
  • Marketing effect
  • SEO discount

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