A new study from the University of Iowa finds companies lose market share when they don’t have enough access to the capital they need to compete.

The researchers found this link between financial and consumer markets by discovering that when financial analysts at brokerage houses stopped following publicly traded firms, those firms lost market share. With less information from analysts, financial markets were less likely to provide those firms with access to capital, and without capital, better-financed competitors can undercut the firms’ prices and take away market share.

“Firms that lost an analyst subsequently lost market share over the next couple of years,” says Jon Garfinkel, professor of finance in the Tippie College of Business.

Garfinkel and his research team analyzed what happened when two brokerage firms merged and analysts were laid off, thus reducing the number of experts providing research and opinions about the financial strength of publicly traded firms. The reports these analysts write are vital to investors, who use the information to help them decide whether to provide capital financing to firms. If less information is available, they may not feel they are getting a full picture of the firm and decide to not provide financing.

So when, for instance, Morgan Stanley merged with Dean Witter Reynolds in 1997, layoffs meant 13 fewer analysts were researching companies. In Garfinkel’s study period, 30 firms merged to 15, costing hundreds of analysts their jobs.

For a large, well-established company such as Starbucks—which is currently covered by more than 20 analysts—the loss of a single analyst probably won’t make much difference, Garfinkel says. But if a firm is covered by only a handful of analysts, the loss of information from a single source might be enough to deprive it of access to capital. That in turn makes it vulnerable to a competitor that could undercut its price and take market share, making it harder for the company to remain competitive.

The researchers found this predatory relationship hundreds of times between 1984 and 2000. For example, IBM lost market share after losing an analyst in 1997 and again in 2004, as did Colgate Palmolive in 2000 and Kmart in 1984 and 1997.

The study found the effects are most notable among certain types of firms—those in hyper-competitive markets and firms that don’t pay a stock dividend or have no credit rating. Garfinkel says firms that are less susceptible to loss of market share after losing an analyst are those with clearly presented financial statements and strong ownership that inspires trust in capital markets.

Garfinkel’s study, “The Effect of Asymmetric Information on Product Market Outcomes,” was co-authored with Matthew Billett of the Indiana University and Miaomiao Yu of Saskatchewan University; it will be published in a forthcoming issue of the Journal of Financial Economics.