IDEAS home Printed from https://ideas.repec.org/a/taf/hbhfxx/v24y2023i4p495-510.html
   My bibliography  Save this article

The Relationship between Analyst Coverage and Overinvestment, and the Mediating Role of Corporate Governance. Evidence From China

Author

Listed:
  • Chia-Hsien Tang
  • Yen-Hsien Lee
  • Wan-Zhu Lu
  • Li Wei

Abstract

This study applied a quantile analysis to test the relationship between analyst coverage and overinvestment in Chinese firms and further sought to demonstrate the mediating effect of corporate governance on overinvestment. The empirical results show that analyst coverage causes overinvestment across all quantiles; however, corporate governance can diminish the effect of firm overinvestment in the higher quantile analysis. Additionally, the difference-in-differences method was used to explore the effectiveness of the Chinese government’s 2013 corporate governance reform, with the results confirming that that governance reform has been effective in inhibiting a firm’s overinvestment. The findings of this study indicate that analysts act as market supervisors in the Chinese capital market, improving corporate governance; however, their coverage does not appear to benefit firms or shareholders. This research highlights the need to review the role of analysts in the market to ensure they can reduce information asymmetry between managers and shareholders without causing overinvestment behavior.

Suggested Citation

  • Chia-Hsien Tang & Yen-Hsien Lee & Wan-Zhu Lu & Li Wei, 2023. "The Relationship between Analyst Coverage and Overinvestment, and the Mediating Role of Corporate Governance. Evidence From China," Journal of Behavioral Finance, Taylor & Francis Journals, vol. 24(4), pages 495-510, October.
    • Handle: RePEc:taf:hbhfxx:v:24:y:2023:i:4:p:495-510
    DOI: 10.1080/15427560.2022.2037601
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/15427560.2022.2037601
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/15427560.2022.2037601?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:hbhfxx:v:24:y:2023:i:4:p:495-510. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/hbhf .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.