Analysts’ Reputational Concerns, Self-Censoring, and the International Dispersion Effect

Chuan-Yang Hwang () and Yuan Li ()
Additional contact information
Chuan-Yang Hwang: Nanyang Business School, Nanyang Technological University, Singapore 639798
Yuan Li: Cambridge Judge Business School and CERF, University of Cambridge, Cambridge CB2 1AG, United Kingdom

Management Science, 2018, vol. 64, issue 5, 2289-2307

Abstract: Stocks with higher forecast dispersion earn lower future returns and have a greater upward bias in the mean reported earnings forecast in international markets. Both phenomena are stronger in countries with more transparent information environments, more developed stock markets, stronger investor protection, greater capital openness, and more intense usage of analysts’ earnings forecasts. Using the 1997–1998 Asian financial crisis as a natural experiment, we find that both phenomena become weaker postcrisis in Malaysia, which imposed capital controls, relative to Thailand and South Korea, which opened their financial markets to foreigners. These results suggest that analysts in countries with greater demand for their forecasts and hence greater concerns for reputations are more likely to self-censor their low forecasts, which leads to a stronger dispersion–bias relation and a stronger dispersion effect.

Keywords: analysts’ incentives; analysts’ reputational concerns; self-censoring; dispersion effect; international markets (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://doi.org/mnsc.2016.2642 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:64:y:2018:i:5:p:2289-2307

Access Statistics for this article

More articles in Management Science from INFORMS Contact information at EDIRC.
Bibliographic data for series maintained by Chris Asher ().