This paper examines the security market response to the announcement of sell‐side analysts' decisions to initiate coverage of a firm. We examine the market reaction to the initiation announcement and the accompanying investment recommendation, by disaggregating our sample based on existing analyst coverage at the announcement date. We find, on average, a significantly larger, positive stock price reaction to buy recommendations conveyed in announcements of coverage initiation for firms with a small existing analyst following compared to such announcements for firms receiving no prior analyst coverage. Tests show that the relation between the extent of preexisting analyst coverage and market response is nonlinear and concave down in shape. Specifically we find that lightly followed firms, on average, experience larger price reactions to announcements of coverage initiations than either previously uncovered firms or more heavily followed firms. We test for and find that this result holds over a range of definitions of light coverage and is not attributable to the presence of an underwriting relationship existing between the analyst's employer and the firm receiving coverage. We do find that initiations by analysts named to Institutional Investor magazine's “All‐American Research Team” produce a significantly larger market reaction than do initiations by non‐All‐American security analysts. In addition, similar to the market response associated with other types of information events, we observe that proxies for the richness of the initiated firms' preannouncement information environment are associated with event‐day average abnormal returns.

Approaches to risk governance are not homogeneous across organizations. Some organizations invest heavily in building formal and strategically focused enterprise-wide risk governance processes whereas others exhibit reduced formality and focus, allowing risk governance to be less structured. We argue that risk governance may best be described as a service dependent upon a network (or ecosystem) of participants who include users of risk information and providers who design and implement risk governance processes. Using a survey sample of 2,380 observations from 2011 to 2016, we find that external calls for enhanced risk governance are positively associated with risk governance processes having greater formality and strategic focus. We find this relationship is partially mediated by internal demands for enhanced risk governance. Further, we find that the positive association between internal demands and enhanced risk governance is reduced by resource constraints and that a risk-seeking attitude is negatively associated with enhanced risk governance. Data Availability: Contact the authors.