Analysts' reputational concerns, self-censoring, and the international dispersion effect
Stocks with higher forecast dispersion earn lower future returns and have a greater upward bias in the mean reported earnings forecast in international markets. Both phenomena are stronger in countries with more transparent information environments, more developed stock markets, stronger investor pr...
| Main Authors: | , |
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| Other Authors: | |
| Format: | Journal Article |
| Language: | English |
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2020
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| Online Access: | https://hdl.handle.net/10356/137670 |
| _version_ | 1811680699506229248 |
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| author | Hwang, Chuan-Yang Li, Yuan |
| author2 | Nanyang Business School |
| author_facet | Nanyang Business School Hwang, Chuan-Yang Li, Yuan |
| author_sort | Hwang, Chuan-Yang |
| collection | NTU |
| description | Stocks with higher forecast dispersion earn lower future returns and have a greater upward bias in the mean reported earnings forecast in international markets. Both phenomena are stronger in countries with more transparent information environments, more developed stock markets, stronger investor protection, greater capital openness, and more intense usage of analysts' earnings forecasts. Using the 1997-1998 Asian financial crisis as a natural experiment, we find that both phenomena become weaker postcrisis in Malaysia, which imposed capital controls, relative to Thailand and South Korea, which opened their financial markets to foreigners. These results suggest that analysts in countries with greater demand for their forecasts and hence greater concerns for reputations are more likely to self-censor their low forecasts, which leads to a stronger dispersion-bias relation and a stronger dispersion effect. |
| first_indexed | 2024-10-01T03:29:12Z |
| format | Journal Article |
| id | ntu-10356/137670 |
| institution | Nanyang Technological University |
| language | English |
| last_indexed | 2024-10-01T03:29:12Z |
| publishDate | 2020 |
| record_format | dspace |
| spelling | ntu-10356/1376702023-05-19T07:31:18Z Analysts' reputational concerns, self-censoring, and the international dispersion effect Hwang, Chuan-Yang Li, Yuan Nanyang Business School Business::Finance Analysts’ Incentives Analysts’ Reputational Concerns Stocks with higher forecast dispersion earn lower future returns and have a greater upward bias in the mean reported earnings forecast in international markets. Both phenomena are stronger in countries with more transparent information environments, more developed stock markets, stronger investor protection, greater capital openness, and more intense usage of analysts' earnings forecasts. Using the 1997-1998 Asian financial crisis as a natural experiment, we find that both phenomena become weaker postcrisis in Malaysia, which imposed capital controls, relative to Thailand and South Korea, which opened their financial markets to foreigners. These results suggest that analysts in countries with greater demand for their forecasts and hence greater concerns for reputations are more likely to self-censor their low forecasts, which leads to a stronger dispersion-bias relation and a stronger dispersion effect. 2020-04-08T03:18:23Z 2020-04-08T03:18:23Z 2018 Journal Article Hwang, C.-Y., & Li, Y. (2018). Analysts' reputational concerns, self-censoring, and the international dispersion effect. Management Science, 64(5), 2289–2307. doi:10.1287/mnsc.2016.2642 0025-1909 https://hdl.handle.net/10356/137670 10.1287/mnsc.2016.2642 2-s2.0-85047262782 5 64 2289 2307 en Management Science © 2017 INFORMS. All rights reserved. |
| spellingShingle | Business::Finance Analysts’ Incentives Analysts’ Reputational Concerns Hwang, Chuan-Yang Li, Yuan Analysts' reputational concerns, self-censoring, and the international dispersion effect |
| title | Analysts' reputational concerns, self-censoring, and the international dispersion effect |
| title_full | Analysts' reputational concerns, self-censoring, and the international dispersion effect |
| title_fullStr | Analysts' reputational concerns, self-censoring, and the international dispersion effect |
| title_full_unstemmed | Analysts' reputational concerns, self-censoring, and the international dispersion effect |
| title_short | Analysts' reputational concerns, self-censoring, and the international dispersion effect |
| title_sort | analysts reputational concerns self censoring and the international dispersion effect |
| topic | Business::Finance Analysts’ Incentives Analysts’ Reputational Concerns |
| url | https://hdl.handle.net/10356/137670 |
| work_keys_str_mv | AT hwangchuanyang analystsreputationalconcernsselfcensoringandtheinternationaldispersioneffect AT liyuan analystsreputationalconcernsselfcensoringandtheinternationaldispersioneffect |