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Do star analysts know more firm-specific information? Evidence from China

Nianhang Xu, Kam C. Chan, Xuanyu Jiang and Zhihong Yi

Journal of Banking & Finance, 2013, vol. 37, issue 1, 89-102

Abstract: Using a unique database in China, we extend the literature to further distinguish the information production role of star vs. non-star analysts. We confirm the general conclusion of a positive association between analyst coverage and stock return synchronicity measured by a firm’s R2 in China. The findings from star analysts, however, show that star analyst coverage actually decreases stock return synchronicity. We contend that the firm-specific human capital in star analysts helps the analysts overcome the challenges of information production in an emerging market. The superior firm-specific human capital argument of star analysts is further supported by the negative association of star analysts’ firm-specific experiences and stock return synchronicity. Our conclusions are robust to different specifications of star analyst presence and different definitions of analysts’ firm-specific experiences. We also find that star analysts exhibit a more accurate earnings forecast than non-star analysts.

Keywords: Star analyst; Stock return synchronicity; Information production; Forecast accuracy (search for similar items in EconPapers)
JEL-codes: G14 G17 G24 (search for similar items in EconPapers)
Date: 2013
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Handle: RePEc:eee:jbfina:v:37:y:2013:i:1:p:89-102