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Conflicts of Interest, Analyst Optimism and Stock Price Crash Risk
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TitleConflicts of Interest, Analyst Optimism and Stock Price Crash Risk  
AuthorXu Nianhang, Jiang Xuanyu, Yi Zhihong and Xu Xinzhong  
OrganizationRenmin University of China; Sun Yat-Sen University;;; 
Key WordsAnalyst Optimism; Conflicts of Interest; Stock Price Crash Risk 
AbstractStock price crash risk is a hot issue in finance research, especially in the global financial crisis context. Using a sample of A-share listed firms in China for the period 2003-2010, this paper investigate the relationship between analyst optimism and stock price crash risk at firm level, and how conflicts of interest affect this relationship. We provide strong evidence that analyst optimism is positively associated with firm-specific stock price crash risk. And, this relation is more pronounced in the bull market. Moreover, we show that the impact of analyst optimism on crash risk is more pronounced when institutional ownership is higher, the number of institutional investors is larger, there is seasoned equity offering and debt issuing, and the ratio of analysts from brokerage firms with high brokerage commissions is higher. These results indicate that conflicts of interest in sell-side research do affect this relation. Our paper contributes to the literature on stock price crash risk, and has important implications for our understanding the role of analysts and the development of capital market in China. 
Serial NumberWP254 
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