Mutual-Fund-Affiliated Analysts and Stock Price Synchronicity: Evidence From China

• Autores: Xuanyu Jiang, Nianhang Xu, Qingbo Yuan
• Localización: Journal of Accounting Auditing and Finance, ISSN-e 2160-4061, ISSN 0148-558X, Vol. 33, Nº 3, 2018, págs. 435-460
• Idioma: inglés
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• Resumen

  • We contend that mutual-fund-affiliated analysts have conflicts of interest in their role of information production. Similar to the investment-bank-affiliated analysts (Malmendier & Shanthikumar, 2014), mutual-fund-affiliated analysts are very likely to speak in two tongues, issuing optimism-biased recommendations to please their mutual fund clients due to the clients’ holdings of the stocks but less optimistic forecasts for their covered firms to provide firm-specific information for mutual funds. The net effect of these mutual-fund-affiliated analysts’ conflicting actions is not clear. We use a unique Chinese dataset that discloses the business affiliations between mutual funds and brokerage firms through commission allocations to examine whether mutual-fund-affiliated analysts produce more (or less) firm-specific information in their research compared with non-affiliated analysts. Our results indicate that mutual-fund-affiliated analysts produce more firm-specific information, manifested by lower stock price synchronicity for the firms they cover. We further find that the mutual-fund-affiliated analyst effects are more pronounced for stocks that represent significant exposure to an affiliated mutual fund’s investment, where mutual funds presumably need more firm-specific information to make investment decisions. Finally, we document that mutual-fund-affiliated analysts conduct more site visits on the stocks held by their mutual fund clients, which explains the greater information dissemination by mutual-fund-affiliated analysts.