This paper examines the relationship between analysts' decisions to follow firms and institutional investors' decisions to hold these firms in their portfolios. The authors argue that these decisions are interrelated through the institutional-brokerage relationship, where analysts' reports can be used to market broker services to institutional customers. They investigate the impact of firm and industry characteristics on analyst following and institutional ownership, using data from 1976 to 1988. The study finds that analyst following increases more in regulated and growing industries, as well as in relatively neglected firms and those with declining volatility. Institutional ownership increases with firm size and market risk. The authors use a simultaneous equations model to account for potential endogeneity, finding that changes in analyst following are positively associated with industry growth and regulation but negatively with volatility. Changes in institutional ownership are positively associated with stock performance, increases in shares outstanding, and lagged analyst following and institutional ownership. The results suggest that institutions are likely to add growing firms to their portfolios, but there is no causal link between changes in analyst following and firm size once feedback effects with institutions are considered. The findings highlight the complex interplay between analysts and institutional investors in shaping firms' information environments.This paper examines the relationship between analysts' decisions to follow firms and institutional investors' decisions to hold these firms in their portfolios. The authors argue that these decisions are interrelated through the institutional-brokerage relationship, where analysts' reports can be used to market broker services to institutional customers. They investigate the impact of firm and industry characteristics on analyst following and institutional ownership, using data from 1976 to 1988. The study finds that analyst following increases more in regulated and growing industries, as well as in relatively neglected firms and those with declining volatility. Institutional ownership increases with firm size and market risk. The authors use a simultaneous equations model to account for potential endogeneity, finding that changes in analyst following are positively associated with industry growth and regulation but negatively with volatility. Changes in institutional ownership are positively associated with stock performance, increases in shares outstanding, and lagged analyst following and institutional ownership. The results suggest that institutions are likely to add growing firms to their portfolios, but there is no causal link between changes in analyst following and firm size once feedback effects with institutions are considered. The findings highlight the complex interplay between analysts and institutional investors in shaping firms' information environments.