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

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Listed:
  • Xu, Nianhang
  • Chan, Kam C.
  • Jiang, Xuanyu
  • Yi, Zhihong

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.

Suggested Citation

  • Xu, Nianhang & Chan, Kam C. & Jiang, Xuanyu & Yi, Zhihong, 2013. "Do star analysts know more firm-specific information? Evidence from China," Journal of Banking & Finance, Elsevier, vol. 37(1), pages 89-102.
    • Handle: RePEc:eee:jbfina:v:37:y:2013:i:1:p:89-102
    DOI: 10.1016/j.jbankfin.2012.08.014
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    References listed on IDEAS

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    More about this item

    Keywords

    Star analyst; Stock return synchronicity; Information production; Forecast accuracy;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage

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