Are U.S. analysts’ recommendation changes for cross-listed stocks more informative than local analysts’?

We investigate stock return and trading volume reactions to analyst recommendation changes issued by local and foreign analysts for international stocks from 40 countries cross-listed in the U.S. We find that recommendation changes by analysts based in the U.S. lead to significantly higher abnormal returns and lower abnormal volumes in the home market of the cross-listed firm, compared to changes made by local analysts. Our results are robust to various controls, stronger for upgrades, and strengthened by an identification strategy that relies on analysts that move locations. We do not find supporting evidence of U.S. analysts facilitating a bonding mechanism for cross-listed stocks as we find a stronger effect for firms from countries with stronger legal, governance, and reporting environments. We also do not find evidence of a certification role of US analysts. Our results are further robust to timing differences in recommendation changes, geographical distance and analysts’ specialization.