2021
Working Paper
HBS Working Paper Series

Government Shareholdings in Brokerage Firms and Analyst Research Quality

By: Sheng Cao, Xianjie He, Charles C.Y. Wang and Huifang Yin

Format:Print
| Language:English
| Pages:46

Abstract

During times when the Chinese government wished to prop up the market, sell-side analysts from brokerages with significant government ownership issued relatively less pessimistic (or more optimistic) earnings forecasts, earnings-forecast revisions, and stock recommendations; they were also slower to revise. Although less accurate, these forecasts significantly influenced investors' beliefs. Overall, the evidence is consistent with analysts' temporary compliance with government incentives, especially those with more expertise or fewer outside options. Our findings highlight the dual role of sell-side analysts in emerging market contexts and how their information production may be compromised at times of economic uncertainty.

Keywords

Sell-side Analysts; Forecast Optimism; Forecast Accuracy; Government Incentives; Stocks; Forecasting and Prediction; Business and Government Relations; Emerging Markets

Citation

Cao, Sheng, Xianjie He, Charles C.Y. Wang, and Huifang Yin. "Government Shareholdings in Brokerage Firms and Analyst Research Quality." Harvard Business School Working Paper, No. 18-095, March 2018. (Revised June 2021.)