Why the silence? Goodwill impairment and analyst coverage cessation in China

This study examines how Chinese financial analysts strategically shift from optimistic recommendations to silence when firms report goodwill impairments. Analyzing individual-level data, we find goodwill impairment significantly increases analyst coverage cessation. Results suggest analysts balance information asymmetry benefits with reputation costs. This effect strengthens with state ownership and analyst-management connections, but weakens with higher analyst reputation and higher institutional ownership. Our findings enhance understanding of analyst behavior in emerging markets and suggest that analyst silence can serve as an early warning signal of deteriorating firm fundamentals.