This paper investigates how equity analysts influence firms' green innovation across different financial markets. Using a unique data set consisting of more than 6000 listed firms across 56 different countries, we find that corporate green innovation is positively associated with the number of equity analysts following the firm. We attribute this result to the informational role of analysts, which encourages managers to invest more in eco‐innovation. However, when we divide the full sample into two subsamples based on whether covered firms are incorporated in market‐oriented or bank‐oriented countries, we find that the association between firm's green innovation and analyst coverage becomes negative in the case of market‐oriented financial systems. We argue that potential explanations for this result rely on the differences occurring among market‐oriented and bank‐oriented systems in terms of listed companies' ownership structure and the prevalence of arm's length transaction banking rather than long‐term lender–borrower relationships.

This article investigates whether equity analysts promote or discourage environmental, social and governance (ESG) engagement by using an international sample of firms incorporated in 46 countries. To establish causality, we rely on two natural experiments, that is, brokerage mergers and closures, which generate an exogenous coverage termination. We find that the loss of an equity analyst results, on average, in an increase in the ESG score. This finding is consistent with the view that equity analysts exacerbate managerial myopia, encouraging listed firms’ managers to excessively focus on short-term outcomes. We also find that the impact of analyst loss on the ESG performance holds only for companies whose managers pay more attention to not miss earnings targets and for firms located in countries where the cultural orientation to long-term growth (rather than short-term results) is stronger. Finally, by decomposing the ESG score into its various sub-pillars, we observe that the impact of analyst loss is driven by the Environmental and Social dimensions, while no significant impact is found for the Governance dimension.

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