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  • 2019
  • Working Paper
  • HBS Working Paper Series

Market Advisor or Government Mouthpiece: The Role of Sell-Side Analysts in Emerging Markets

By: Sheng Cao, Xianjie He, Charles C.Y. Wang and Huifang Yin
  • Format:Print
  • | Language:English
  • | Pages:46
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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. "Market Advisor or Government Mouthpiece: The Role of Sell-Side Analysts in Emerging Markets." Harvard Business School Working Paper, No. 18-095, March 2018. (Revised September 2019.)
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About The Author

Charles C.Y. Wang

Accounting and Management
→More Publications

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  • Measuring Impact at JUST Capital By: Charles C.Y. Wang and Ethan Rouen
  • The Sustainable Corporate Governance Initiative in Europe By: Mark Roe, Holger Spamann, Jesse M. Fried and Charles C.Y. Wang
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