Cultural Proximity and the Processing of Financial Information
Year: 2017
Type: article
Abstract: This paper examines how culture affects information asymmetry in financial markets. We extract firms traded in the U.S. but headquartered in regions sharing Chinese culture (“Chinese firms”), and 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.
Authors: Qianqian Du, Frank Yu, Xiaoyun Yu
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W3124348444