 Do political connections decrease the accuracy of stock analysts' recommendations in the Chinese stock market?Feng He and Yaming Ma Economic Modelling, 2019, vol. 81, issue C, 59-72 Abstract: This paper studies the association between the accuracy of analysts' recommendations and political connections in the Chinese stock market. As most brokerage firms in China are state-owned, it raises concerns about conflicts of interest among their employed analysts issuing recommendations for Chinese state-owned enterprises. Based on 8469 analysts' recommendations with different ratings for both state-owned and non-state-owned enterprises from 74 brokerage firms, we document that analysts' recommendations are less accurate for Chinese state-owned enterprises, which supports the hypothesis that conflicts of interest create recommendation biases. Political connections encourage analysts to be more optimistic on SOEs and even to generate misleading “Buy” and “Hold” recommendations. Our results demonstrate the existence of an optimism bias among politically connected analysts on state-owned enterprises in China. Keywords: Political connection; Conflicts of interest; Analysts' recommendations accuracy; Optimistic bias (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:81:y:2019:i:c:p:59-72 DOI: 10.1016/j.econmod.2018.12.012 Access Statistics for this article Economic Modelling is currently edited by S. Hall and P. Pauly More articles in Economic Modelling from Elsevier |
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