Home >> Working Paper
Interest Conflicts, Reputational Effects and Stock Price Efficiency
Read        DownLoad
TitleInterest Conflicts, Reputational Effects and Stock Price Efficiency  
AuthorZhou Mingshan Li Siguang and Lin Jing  
OrganizationUniversity of Finance and Economics,,linjing729@163.comSouthwestern  
Key WordsAffiliated Advisor; Incentive Conflicts; Reputational Incentive; Stock Price Efficiency 
AbstractThis paper constructs a two-period model of stock recommendations to investigate the mechanism how the interaction between analysts’ interest conflicts, incentive type heterogeneity and asymmetric information influences the information quality and stock price efficiency. The results show that due to non-neutral incentive and reputational concerns regarding “identification problems”, strategic reporting behavior will arise for both affiliated and independent analysts respectively. Analysts’ strategic reporting driven by distortion effects and reputational effects together with receiver skeptism from investors will lead to deteriorated information quality and excessive stock price volatility. Our results are independent of the non-strategic player assumption, and we also find that categorical ranking systems will help to reduce stock market volatility. These results provide theoretical supports for policies such as improving analyst’ compensation incentive system, strengthening information disclosure, establishing long-term tracking system and appropriate accountability system. 
Serial NumberWP567 
  • Institute of Economics, Chinese Academy of Social Sciences
  • Copyright Economic Research Journal
  • The uploaded articles by this website express the authors’ views, not necessarily the views of this website.
  • Perennial Legal Counsel: Lu Kang (Chong Guang Law Office)
  • ISSN 0577-9154 CN 11-1081/F Postal Distribution Code 2-25l (Domestic) M16 (Overseas)
  • ICP 10211437 (Beijng)
  • No.2,Yuetan Bei Xiaojie, Xicheng District, Beijing 100836, P. R. China
  • Phone/Fax: (+8610) 68034153