Do analysts follow firms with able managers?

Although previous studies suggest that management quality impacts analyst behavior, there is a dearth in direct empirical evidence that proves this. A sample of listed Chinese firms over the period 2008-2016 proves that a firm with highly skilled managers draws more analysts. We use an instrumental variable approach to mitigate endogeneity issues. Tests show that the positive impact of managerial ability on analyst following is more salient in firms with no political connections and firms located in regions with developed formal institutions. Firms with high-capability managers help analysts improve their forecast accuracy and lower the dispersion of their opinions.