Cultural Proximity and the Processing of Financial Information

Du, Qianqian; Yu, Frank; Yu, Xiaoyun

doi:10.2139/ssrn.2225722

Cited by 21 publications

(27 citation statements)

References 17 publications

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“…showing that forecasts made by Chinese analysts of foreign houses are significantly more accurate than those by non-Chinese analysts of foreign houses. This finding is consistent with Du, Yu, and Yu (2014), who show that among a set of U.S. analysts who cover Chinese firms listed in the U.S. stock markets, analysts with Chinese ethnic origin, especially those first-generation Chinese immigrants, issue more accurate forecasts than non-Chinese analysts.…”

Section: E Accuracy Of Local and Foreign Analystssupporting

confidence: 89%

Social Trust and Differential Reactions of Local and Foreign Investors to Public News

Jia

Wang

Xiong

2015

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Section: E Accuracy Of Local and Foreign Analystssupporting

confidence: 89%

Social Trust and Differential Reactions of Local and Foreign Investors to Public News

Jia

Wang

Xiong

2015

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“…Bae, Stulz, and Tan (2008) find that analysts residing in a country make more precise earnings forecasts for firms in that country than non-resident analysts. Furthermore, Du, Yu, and Yu (2014) find that among U.S. analysts who cover Chinese firms listed in the U.S. stock markets, analysts with Chinese ethnic origin provide more accurate forecasts than analysts without Chinese ethnic origin. In contrast, our analysis compares the reactions of local and foreign investors after controlling for the differential information quality between local and foreign analysts.…”

Section: Related Literaturementioning

confidence: 96%

“…First, local investors are better informed than foreign investors about home assets due to their superior private information, e.g., Gehrig (1993) and Brennan and Cao (1997). Second, local analysts have better information quality than foreign analysts due to their lower information collection costs, e.g., Bae, Stulz, and Tan (2008) and Du, Yu, and Yu (2014).…”

mentioning

confidence: 99%

Market Segmentation and Differential Reactions of Local and Foreign Investors to Analyst Recommendations

Jia

Wang

Xiong

2017

The Review of Financial Studies

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This paper uses the segmented dual-class shares of Chinese firms-A-shares traded inside mainland China by local investors and H shares traded in Hong Kong by foreign investors-to compare reactions of local and foreign investors to recommendations made by local and foreign analysts. We find a rich set of differential reactions, and, in particular, the differential reactions of A-share prices to recommendations made by local and foreign analysts are greater than the differential reactions of H-share prices. These findings support the notion that social connections between investors and analysts can cause differential investor reactions to analyst recommendations.

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“…A related strand of literature shows that geographical proximity to firms influences analysts’ coverage decisions and results in better accuracy (Malloy (), Bae, Stulz, and Tan (), O'Brien and Tan ()). Du, Yu, and Yu () find that cultural proximity, which is distinct from geographical proximity, improves the processing of financial information and forecasting performance.…”

Section: Motivation and Previous Workmentioning

confidence: 99%

Before an Analyst Becomes an Analyst: Does Industry Experience Matter?

Bradley¹,

Gokkaya²,

Liu

2017

The Journal of Finance

229

129

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Using hand-collected biographical information on financial analysts from 1983 to 2011, we find that analysts making forecasts on firms in industries related to their preanalyst experience have better forecast accuracy, evoke stronger market reactions to earning revisions, and are more likely to be named Institutional Investor all-stars. Plausibly exogenous losses of analysts with related industry experience have real financial market implications-changes in firms' information asymmetry and price reactions are significantly larger than those of other analysts. Overall, industry expertise acquired from preanalyst work experience is valuable to analysts, consistent with the emphasis placed on their industry knowledge by institutional investors. SELL-SIDEANALYSTS ARE AMONG the most important information agents in capital markets. As a result, a large body of academic research has been devoted to the question of what makes a good sell-side analyst. The literature shows that a number of innate characteristics and external factors such as analysts' forecasting experience, political views, portfolio complexity, and the prestige of their brokerage house are related to analysts' performance (Clement (1999), Gilson et al. (2001), Malloy (2005), Jiang, Kumar, and Law (2016)). Of these factors, practitioners indicate that industry knowledge is perhaps the most important quality an analyst can possess. Each October, Institutional Investor (II) releases its annual all-star analyst rankings, which polls buy-side institutions and ranks the top sell-side analysts in each industry. In addition to a list of top analysts, II provides information on the qualities that respondents view as most important. Industry knowledge has been consistently ranked the most important trait. Corroborating II's survey results, Brown et al. (2015) find that sell-side analysts also believe that industry knowledge is the most important characteristic related to their performance and career concerns. * Daniel Bradley is with the University of South Florida. Sinan Gokkaya and Xi Liu are with Ohio University. We appreciate comments from

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Cultural Proximity and the Processing of Financial Information

Cited by 21 publications

References 17 publications

Social Trust and Differential Reactions of Local and Foreign Investors to Public News

Social Trust and Differential Reactions of Local and Foreign Investors to Public News

Market Segmentation and Differential Reactions of Local and Foreign Investors to Analyst Recommendations

Before an Analyst Becomes an Analyst: Does Industry Experience Matter?

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