Do better-informed analysts forecast more accurately? Evidence from China
This paper investigates whether the accuracy of analyst earnings forecasts is affected by the investment banking relationships with the covered companies and how the forecast bias is mitigated by the reputation of the analysts and the development of the legal environment.Our empirical materials are from Chinese stock market and our results show a very clear adverse effect of information advantage on the accuracy of earnings forecast and such adverse information effect is strongest in an IPO relation.Our results support the ‘conflicts of interests hypothesis’ and show that better-informed analysts issue more optimistically biased forecasts.Second,we find a mitigating role played by the reputation effect and a better developed legal environment.The mitigating effect of reputation is much stronger for a forecast issued by a ‘better-informed’ analyst than a forecast issued by an analyst without information advantage.For the first time,we find that analysts with investment banking relationships self-discipline in a better developed legal system.
analyst forecasts forecast bias reputation legal system
Shengnian Wang Chunyan Wei Liang Han
Economics and Management School,Shihezi University Guanghua Management School,Peking University Economics and Management School,Shihezi University;Corresponding author. Surrey Business School,Univ
国内会议
石河子
英文
1-22
2013-07-01（万方平台首次上网日期，不代表论文的发表时间）