Investment Analyst Networks and the Similarity of Corporate Behavior

In recent years, organizational scholars have documented the many ways in which contemporary
organizations radically differ from their predecessors, thus rendering obsolete many of our
existing ways of categorizing firms. We attempt to overcome this challenge by introducing a new
measure to assess the degree of similarity between firms: analyst-based similarity. Publicly-
traded firms are routinely covered by one or more sell-side stock analysts. Embedded in these
coverage patterns are analyst assignment decisions made by investment banks that consciously
aim to reduce information acquisitions costs by assigning analysts to similar sets of firms. Thus,
analyst coverage patterns reflect underlying similarities among firms in the eyes of a key
audience for corporate organizations: investment banks and the broader investment community.
Leveraging the overlapping coverage patterns of sell-side market analysts, we create a network-
based, dyadic annual measure of similarity among all publicly traded firms from 1990-2020. We
use this measure to predict similarity among a set of corporate decisions and outcomes, including
corporate time horizons, corporate political activity, and measures of stakeholder performance.