Minority shareholders protection and the incremental textual information in analysts' reports: A quasi-natural experiment in China

This study investigates the impact of minority shareholder protection on the information production behavior of financial analysts, with a particular focus on the China Securities Investor Service Center (CSISC)—a unique institutional governance mechanism. While investor protection is widely recognized for corporate governance, its influence on financial intermediaries remains underexplored. Using a comprehensive dataset of 489,265 firm-analyst-quarter observations from China's A-share market, we employ text analysis techniques to measure the incremental textual information in analysts' research reports. Our findings reveal that CSISC's exercise of rights significantly enhances analysts' textual information primarily by inducing firms to substantially improve the quantity and quality of their information disclosures. The impact is particularly pronounced for firms with high earnings management or long disclosure lags, as well as for non-star, less experienced, or less industry-expert analysts. CSISC's exercise also improves the quality of analysts' earnings forecast, indicating that minority investor activism encourages analysts to provide more idiosyncratic insights and in-depth firm-specific analyses rather than obscure language or simply replicating the firm's disclosed information post-CSISC. We also verify the distinct supervision effect of CSISC. Overall, our study underscores CSISC's pivotal role in shaping analysts' information production and indicates a complementary relationship between minority shareholder protection and analysts.