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Government Shareholdings in Brokerage Firms and Analyst Research Quality

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Author
Sheng Cao Xianjie He Charles C. Y. Wang Huifang Yin
Category
Financial
Date Posted
2018/03/14
Date Retrieved
2022/11/22
Date Revised
Date Written
2022/11/22
Description
We examine how government ownership in brokerage firms influences analyst research quality in the Chinese context. When the government has strong incentives to prop up market prices analysts from brokerages with significant government shareholdings ("government-brokerage analysts") issued relatively more optimistic earnings forecasts and revisions and more favorable stock recommendations; they were also slower to revise. Although these forecasts are also relatively less accurate they influenced investors beliefs. In other times and contexts government-brokerage analysts produce relatively more neutral and timely research or relatively more accurate and less optimistic forecasts. Government-brokerage analysts thus balance maintaining market credibility against complying with government incentives. In doing so government-brokerage analysts serve both market advisory and stabilization functions.
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JEL Classifications
G14; G24; G28; O16
Keywords
Sell-side analysts; Forecast optimism; Forecast accuracy; Government ownership; Shareholders; Emerging markets; Coordinated economies
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Pages
60
Random
590
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URL
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4283339
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