Private communications between financial analysts and firm managers: Evidence from China

Li, Mengjia 2024. Private communications between financial analysts and firm managers: Evidence from China. PhD Thesis, Cardiff University. Item availability restricted.

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Abstract

The thesis comprises three empirical chapters based on a unique dataset from China: corporate site visits. Chapter 2 investigates the impact of the frequency of corporate site visits on the precision of management earnings guidance. In Chapter 3, I study whether sell-side financial analysts’ social network improves analysts’ forecast accuracy. Chapter 4 identifies analyst-manager collusion in meeting minutes of corporate site visits. In chapter 2, I find that more frequent corporate site visits before the release of management range guidance leads to more precise management earnings guidance. This effect is stronger for firms with higher information uncertainty and lower information processing capacity, suggesting that firm managers acquire information from financial analysts to reduce earnings uncertainty. I find little empirical support for the organizational impression management explanation that managers proactively release more precise forecasts to impress investors. In chapter 3, I find that sell-side financial analysts’ social network improves analysts’ forecast accuracy. Specifically, analysts with a more central position in social networks (higher eigenvector centrality) based on corporate site visits generally have more face-to-face opportunities to learn from their peers, significantly improving their forecast performance. Such a social learning effect exists when more influential peers attend corporate site visits and when forecasted firms with higher information uncertainty. In chapter 4, I identify a more implicit way for analyst-manager collusion during corporate site visits. Specifically, I observe that analysts engage in collusion when firms announce the proposal of seasoned equity offerings (SEOs) due to competition for potential underwriting mandates. Then, affiliated analysts participate in collusion to defend their client firms’ stock prices, especially when client firms are experiencing a challenging time. These collusions have a discernible impact on market reactions and provide analysts with a notable informational advantage. The interpretation behind could be that analysts operate discreetly hidden in teams of visitors made up of multiple institutions, allowing them to assist management implicitly without risking damage to Abstract ii the individual analyst’s reputation. Overall, my study uncovers a novel venue of analyst-manager collusion.

Item Type:	Thesis (PhD)
Date Type:	Completion
Status:	Unpublished
Schools:	Business (Including Economics)
Subjects:	H Social Sciences > H Social Sciences (General)
Uncontrolled Keywords:	Corporate site visits; Financial analysts; Management range guidance; Precision; Information advantage; Organizational impression management; Social network
Date of First Compliant Deposit:	28 August 2024
Last Modified:	28 Aug 2024 11:25
URI:	https://orca.cardiff.ac.uk/id/eprint/171585

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