Skip to Main Content
HBS Home
  • About
  • Academic Programs
  • Alumni
  • Faculty & Research
  • Baker Library
  • Giving
  • Harvard Business Review
  • Initiatives
  • News
  • Recruit
  • Map / Directions
Working Knowledge
Business Research for Business Leaders
  • Browse All Articles
  • Popular Articles
  • Cold Call Podcasts
  • About Us
  • Leadership
  • Marketing
  • Finance
  • Management
  • Entrepreneurship
  • All Topics...
  • Topics
    • COVID-19
    • Entrepreneurship
    • Finance
    • Gender
    • Globalization
    • Leadership
    • Management
    • Negotiation
    • Social Enterprise
    • Strategy
  • Sections
    • Book
    • Cold Call Podcast
    • HBS Case
    • In Practice
    • Lessons from the Classroom
    • Op-Ed
    • Research & Ideas
    • Research Event
    • Sharpening Your Skills
    • What Do You Think?
    • Working Paper Summaries
  • Browse All
    • COVID-19 Business Impact Center
      COVID-19 Business Impact Center
      The Dyadic Ties of Managers and Financial Analysts and Their Externality on a Firm's Information Environment
      30 Jun 2016Working Paper Summaries

      The Dyadic Ties of Managers and Financial Analysts and Their Externality on a Firm's Information Environment

      by Zengquan Li, T.J. Wong, and Gwen Yu
      Research by Gwen Yu and colleagues examines whether firms use private networks with financial analysts to disclose information to the capital market. Using a sample of listed firms and financial analysts from 2005 to 2014 in China, the study shows that firms with connected analysts have higher quality consensus forecast. Also, when a connected analyst drops coverage of a firm, there is a decrease in the quality of the forecasts of other analysts following the firm. The finding suggests that in emerging markets, connected analysts can be a channel of information dissemination to the capital market.
      LinkedIn
      Email

      Author Abstract

      When emerging market firms raise external capital, they face a tradeoff where greater transparency may lead to a lower cost of capital but at the cost of revealing proprietary information in their relational business practices. We find that firms overcome this challenge by relying on financial analysts within their private networks, who then transmit the information to arm’s length analysts outside the network. Specifically, we show that firms with more connected analysts have more accurate and informative firm-level consensus forecasts. Likewise, when a connected analyst drops coverage of a firm, there is a decrease in the accuracy and informativeness of the unconnected (arm’s length) analysts’ forecasts, suggesting that the connected analyst’s knowledge spills over to those outside the private network. The spillover effect is stronger when firms have plans to access external capital or rely heavily on non-arm’s length transactions. The findings suggest that managers’ private networks with financial analysts can have positive externalities for firms’ information environments.

      Paper Information

      • Full Working Paper Text
      • Working Paper Publication Date: June 2016
      • HBS Working Paper Number: 16-135
      • Faculty Unit(s): Accounting and Management
        Trending
          • 08 Mar 2021
          • In Practice

          COVID Killed the Traditional Workplace. What Should Companies Do Now?

          • 25 Feb 2019
          • Research & Ideas

          How Gender Stereotypes Kill a Woman’s Self-Confidence

          • 17 May 2017
          • Research & Ideas

          Minorities Who 'Whiten' Job Resumes Get More Interviews

          • 07 Apr 2021
          • Research & Ideas

          How Teams Work: Lessons from the Pandemic

          • 02 Apr 2021
          • Research & Ideas

          Salary Negotiations: A Catch-22 for Women

      Find Related Articles
      • Financial Services
      • China

      Sign up for our weekly newsletter

      Interested in improving your business? Learn about fresh research and ideas from Harvard Business School faculty.
      ǁ
      Campus Map
      Harvard Business School Working Knowledge
      Baker Library | Bloomberg Center
      Soldiers Field
      Boston, MA 02163
      Email: Editor-in-Chief
      →Map & Directions
      →More Contact Information
      • Make a Gift
      • Site Map
      • Jobs
      • Harvard University
      • Trademarks
      • Policies
      • Digital Accessibility
      Copyright © President & Fellows of Harvard College