Cultural Proximity and the Processing of Financial Information

Qianqian Du (First Author), Fang Yu (Participant Author), Xiaoyun Yu (Participant Author)

Research output: Contribution to journalJournal

Abstract

This paper examines how culture affects information asymmetry in financial markets. We extract firms traded in the United States but headquartered in regions sharing Chinese culture (“Chinese firms”), and we manually identify a group of U.S. analysts of Chinese ethnic origin (“Chinese analysts”). We find that Chinese analysts issue more accurate forecasts on Chinese firms than non-Chinese analysts. The effect is stronger among firms with less transparent information environments. Further evidence suggests that cultural proximity can go beyond language commonality and analysts’ pre-existing channels for information. Market reaction is stronger when Chinese analysts issue favorable forecast revisions or upgrades about Chinese firms.
Original languageEnglish
Pages (from-to)2703-2726
JournalJournal of Financial and Quantitative Analysis
Volume52
Issue number6
DOIs
Publication statusPublished - 2017

Corresponding author email

qianqian.du@polyu.edu.hk

Source

Available at SSRN: https://ssrn.com/abstract=2225722 or http://dx.doi.org/10.2139/ssrn.2225722

Keywords

  • Culture
  • Forecast Accuracy
  • Information Asymmetry
  • Demographic Economics
  • Financial Analysts

Indexed by

  • FT
  • ABDC-A*
  • Scopus
  • SSCI

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