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Does analyst following restrain tunneling? Evidence from brokerage closures and mergers

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  • Gao, Kaijuan
  • Shen, Yiran
  • Chan, Kam C.

Abstract

We examine the impact of analyst following on tunneling using a sample of Chinese firms. Our findings suggest that, after brokerage closures and mergers, tunneling increases for firms with reduced analyst following. Additional analyses suggest that when a firm has severe agency problems (in terms of a large divergence of ownership and control or more related-party transactions) or a poor information environment (in terms of high earnings management), the impact of a reduction of analyst following on the increase in tunneling is more salient.

Suggested Citation

  • Gao, Kaijuan & Shen, Yiran & Chan, Kam C., 2021. "Does analyst following restrain tunneling? Evidence from brokerage closures and mergers," Finance Research Letters, Elsevier, vol. 41(C).
    • Handle: RePEc:eee:finlet:v:41:y:2021:i:c:s1544612320316639
    DOI: 10.1016/j.frl.2020.101849
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