TITLE:
Quantification of Firm-Analyst Relationship: Evidence from China
AUTHORS:
Jianlei Hou
KEYWORDS:
Firm-Analyst Relationship, Reciprocity, Stock Recommendation, Earnings Forecasting Performance, China
JOURNAL NAME:
Open Journal of Business and Management,
Vol.10 No.4,
July
28,
2022
ABSTRACT: With a
Chinese dataset of 166,689 research reports with 3014 stocks and 4510 analysts
from 2007 to 2017, we quantify the firm-analyst relationship based on an informational characteristic-model of analyst coverage.
Furtherly, we investigate the research rationality from the perspective of the
reciprocity between analyst and listed firms by examining the impact of
firm-analyst relationship on stock recommendation and earnings forecasting
performance. Empirical results suggest that close relationship between analysts
and firms’ managers may prompt security analysts to render relatively positive
rating for target listed firms, which may get more firm-specific information
for improving analysts’ earnings forecasting performance. Our paper provides an
effective approach to quantifying the firm-analyst relationship, and
contributes to the literature on the reciprocity between analysts and listed
firms.