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Analyst following and corporate governance: emerging-market evidence

  • Minna Yu
Registered author(s):

    Purpose – The purpose of this paper is to examine the association of analyst following with the strength of overall firm-specific corporate governance (CG) in an emerging-market setting. Design/methodology/approach – This paper uses empirical methodology to test the hypothesis with a sample of 753 emerging-market companies over 2001 and 2002. Findings – It is found that the effectiveness of CG has a positive impact on the level of analyst following. Further analyses indicate that this positive relation is concentrated in the countries with a common law tradition. Research limitations/implications – This paper joins prior research by providing evidence on the information intermediary role of financial analysts. It also provides supporting evidence on analysts' monitoring role in common law countries of emerging markets. Practical implications – The findings of this paper have implications for the decision making of managers and investors. By improving CG at the firm level, companies can significantly improve their information environments. The findings of this paper also have important implications for standard setters and regulators in emerging economies by shedding light on the importance of requesting firms to have good CG mechanisms in place, particularly in countries with relatively strong investor protection. Originality/value – Although prior research has documented the positive effect of country-level investor protection or a single aspect of firm-level CG on analyst following, it is unknown whether the level of analyst following is associated with the quality of firm-specific CG. This paper fills in this research gap by empirically investigating this relation.

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    File URL: http://www.emeraldinsight.com/journals.htm?issn=1030-9616&volume=23&issue=1&articleid=1875560&show=abstract
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    Article provided by Emerald Group Publishing in its journal Accounting Research Journal.

    Volume (Year): 23 (2010)
    Issue (Month): 1 (July)
    Pages: 69-93

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    Handle: RePEc:eme:arjpps:v:23:y:2010:i:1:p:69-93
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    1. Paul A. Gompers & Joy L. Ishii & Andrew Metrick, 2002. "Corporate Governance and Equity Prices," Center for Financial Institutions Working Papers 02-32, Wharton School Center for Financial Institutions, University of Pennsylvania.
    2. La Porta, Rafael & Lopez-de-Silanes, Florencio & Schleifer, Andrei & Vishny, Robert, 2001. "Investor Protection and Corporate Governance," Working Paper Series rwp01-017, Harvard University, John F. Kennedy School of Government.
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    12. Mark H. Lang & Karl V. Lins & Darius P. Miller, 2004. "Concentrated Control, Analyst Following, and Valuation: Do Analysts Matter Most When Investors Are Protected Least?," Journal of Accounting Research, Wiley Blackwell, vol. 42(3), pages 589-623, 06.
    13. Choi, Jongmoo Jay & Park, Sae Woon & Yoo, Sean Sehyun, 2007. "The Value of Outside Directors: Evidence from Corporate Governance Reform in Korea," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 42(04), pages 941-962, December.
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