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Conflict on Interest, Analysts’ Earnings Forecasts and Investment Recommendations
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TitleConflict on Interest, Analysts’ Earnings Forecasts and Investment Recommendations  
AuthorWu Chaopeng, Zheng Fangbiao, and Yang Shijie  
OrganizationManagement School, Xiamen University 
Key WordsFinancial Analyst; Conflict of interest; Earning Forecast Bias; Stock Recommendation Bias 
AbstractThis paper examines whether the conflict of interest affect analysts’ earning forecasts and recommendations. Using a sample of 54369 forecasts and recommendations made by 1743 securities analysts from 68 security companies for Chinese listed companies during 2004-2009, we test the prediction that the preference for cultivating the relations with the management of listed companies, institutional investors and investment banking department encourages analysts to report optimistic earnings forecasts and stock recommendation. We also find that the analysts with greater reputation such as “New Wealth Best Analyst” are not inclined to report truthfully, their recommendations that are even more positively biased than other analysts although they report relatively conservative earning forecasts. Our results explore the conflicts of interest that cause analyst releasing biased reports, and thus carry important policy implications for government to regulate the industry of securities analyst.  
Serial NumberWP40 
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