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Analyst coverage, optimism, and stock price crash risk: Evidence from China

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

Abstract

We examine the relations among analyst coverage, analyst optimism, and firm-specific stock price crash risk. Using a unique Chinese database, we find that an increase in a firm's analyst coverage leads to an increase in stock price crash risk and this positive relation is more pronounced when analysts are more optimistic analysts and are affiliated with investment banks and brokerage firms with mutual funds relation. We also find some weak evidence to suggest that analyst optimism on crash risk is less pronounced when analysts have high personal reputations or are affiliated with reputable brokerage firms.

Suggested Citation

  • Xu, Nianhang & Jiang, Xuanyu & Chan, Kam C. & Yi, Zhihong, 2013. "Analyst coverage, optimism, and stock price crash risk: Evidence from China," Pacific-Basin Finance Journal, Elsevier, vol. 25(C), pages 217-239.
    • Handle: RePEc:eee:pacfin:v:25:y:2013:i:c:p:217-239
    DOI: 10.1016/j.pacfin.2013.09.001
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    More about this item

    Keywords

    Analyst optimism; Crash risk; Conflict of interest; Reputation;
    All these keywords.

    JEL classification:

    • G00 - Financial Economics - - General - - - General
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage

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