Topic: Do Analysts with Close Ties Improve
the Firms’ Information Environment? Evidence from a Relationship-based Economy
Speaker: T.J. Wong, Choh-Ming
Li Professor of Accountancy, Chinese University of Hong Kong
Date: October 28th (Wed.)
Time: 2:00-3:30pm
Location: Building 4, Room 101
Language: English
Abstract:
This paper
examines the information role of social and business ties between financial
analysts and firm managers in a relationship-based economy like China’s, where
relational contracts create challenges to a firm’s public disclosures. We find
that social and business ties can facilitate the private transfer of
information and create positive externalities that improve the firm’s
information environment. Specifically, we find that forecasts of analysts
connected through social and business ties are more accurate and timely than
those of unconnected analysts. Similarly, firms with more connected analysts
following have more accurate consensus forecasts and lower forecast dispersion.
These results are not simply the aggregation of the effects of individual
analysts, but rather are due to a spillover effect that impacts the forecast
accuracy of both the unconnected analysts and the firm’s information
environment as a whole. This spillover effect is stronger for firms that are
politically connected or that have a concentrated number of customers and
suppliers whose contracts are more relationship-based. In additional tests, we
find that these results are present using a difference-indifference analysis of
a subsample of analysts that have left the financial analyst industry.
About the speaker:
Professor T.J. Wong is the Choh-Ming Li Professor of Accountancy and the
Director of the Center for Institutions and Governance of the Chinese
University of Hong Kong (CUHK). He also served as the Dean of the CUHK Business
School from 2008 to 2013. He received his BA in Economics (summa cum laude)
from Dickinson College, and MBA and PhD degrees from UCLA. Before joining CUHK,
he taught at the University of Maryland - College Park and the Hong Kong
University of Science and Technology. Professor Wong has published numerous
research articles in finance and accounting journals such as Journal of Finance, Journal of Financial Economics, Review of Financial Studies, and Journal of Accounting and Economics. Professor
Wong currently serves as an editor of The Accounting Review and has served in
various editorial boards including Review
of Accounting Studies, Journal of Accounting and so on.
