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Language Commonality and Sell-Side Information Production

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  • Ruishen Zhang

    (Institute of Accounting and Finance, Shanghai University of Finance and Economics, Shanghai 200433, China)

Abstract

I study the effects of language commonality (i.e., sharing a native language) on information production in financial markets. Using a hand-collected data set on the prevalent dialects for 2,091 cities (counties) in China, I identify the effects of language commonality separately from those of shared hometown and geographic proximity. In in-sample tests, language commonality between analysts and CEOs increases the return of trading on analysts’ recommendations by 5.5%. The results mainly stem from less intelligible dialects. Broadly speaking, language commonality can alleviate communication frictions when nonnative languages are used in professional settings.

Suggested Citation

  • Ruishen Zhang, 2022. "Language Commonality and Sell-Side Information Production," Management Science, INFORMS, vol. 68(6), pages 4435-4453, June.
    • Handle: RePEc:inm:ormnsc:v:68:y:2022:i:6:p:4435-4453
    DOI: 10.1287/mnsc.2021.4059
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    3. Song, Jie & Liang, Shangkun & Zhen, Yuhan, 2023. "Does CEO-auditor dialect sharing affect stock price crash risk? Evidence from China," Finance Research Letters, Elsevier, vol. 57(C).
    4. Ding, Guolei & Lei, Jin & Liu, Yunxiao & Wang, Zhen, 2024. "Supplier–customer cultural similarity and supplier performance," Journal of Banking & Finance, Elsevier, vol. 163(C).

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