High Analyst Research Articles

The Real Value of CSR Performance in the NEV Industry: Evidence from China

Corporate social responsibility (CSR) is increasingly becoming a major concern for investors and consumers, prompting companies to devote more resources to community engagement to manage conflict and improve business performance. In this study, we conducted an empirical analysis with a sample of 385 listed companies in China’s new energy vehicle (NEV) industry to analyze the relationship between CSR performance and corporate value (CV). With the ordinary least squares (OLS) regression analysis, our study’s results show a positive relationship between the CSR performance of these companies and corporate value. In addition, our findings indicate a lagged effect in the relationship between CSR and CV. The mechanism analysis suggests that corporate CSR performance helps to improve corporate reputation, reduce financing constraints, and thus increase corporate value. Moreover, high analyst attention and information transparency can enhance the positive effects of corporate CSR. This study contributes to the existing literature and empirical evidence by exploring the correlation between CSR performance and firm value in the context of emerging countries and the NEV industry.

The impact of inclusion in the MSCI EM index on firms' investment efficiency：Evidence from China

This paper investigates the impact of A-share inclusion in the MSCI index on corporate investment efficiency. Using the inclusion of A-shares in the MSCI index on June 1, 2018 as a quasi-natural experiment, the results of the PSM-DID model show that the inclusion of A-shares in the MSCI index significantly reduces corporate investment efficiency. Further analysis reveals that inefficient investment mainly occurs in over-invested firms, non-state-owned firms, and firms audited by Big 4 accounting firms. Firms with low managerial ownership and high degree of surplus management are more likely to overinvest after A-share inclusion in the MSCI index, which leads to a decrease in investment efficiency. Firms with high analyst attention and low equity checks and balances increase their investment after A-share inclusion in the MSCI index, and the influences of decision-making power and control can be the triggers to reduce investment efficiency.

Digital Transformation on Corporate Environmental Performance

Digital transformation, as a powerful catalyst for the deep integration of the digital economy and the real economy, has emerged as a crucial driver for enterprise transformation and upgrading, as well as reshaping the competitive landscape. Drawing on data from Chinese A-share listed companies between 2010 and 2019, this study empirically examines the relationship between digital transformation and corporate environmental performance, as well as its underlying impact mechanisms. The findings indicate that digital transformation significantly enhances the level of corporate environmental performance. Moreover, corporate digital transformation facilitates the improvement of environmental performance by enhancing green technology innovation capabilities and optimizing production structures. The positive impact on environmental performance is particularly pronounced in state-owned enterprises, high-growth companies, those with substantial research and development investments, and those garnering high analyst attention.

The curvilinear effect of environmental, social, and governance performance on stock price crash risk in China

AbstractWith the concept of environmental, social, and governance (ESG) gaining traction worldwide, firms are becoming increasingly transparent about their ESG practices to enhance their legitimacy. This study draws on signaling theory, stakeholder theory, and opportunism theory, and uses panel data from Chinese A‐share listed firms from 2009 to 2022. It identifies a U‐shaped relationship between ESG performance and stock price crash risk, indicating that the increase in ESG performance decreases stock price crash risk, but after reaching a threshold value, it increases the risk. Green innovation moderates this U‐shaped relationship, reinforcing its effects. Meanwhile, earnings management plays a mediating role in this U‐shaped relationship. Heterogeneity analyses reveal that the U‐shaped relationship is significant in polluting industries, firms without the duality of chairperson and CEO, firms with high analyst coverage, and those under high market competition. The moderating effect of green innovation is particularly significant in firms with poor external legal environments and firms with positive management tone. Our findings provide novel insights and recommendations for policymakers, managers, and stakeholders to develop effective ESG policies.

The power of crowds: The effect of online platform interactions on greenwashing

AbstractGreenwashing is a fraudulent environmental, social and governance (ESG) behavior. Previous literature has explored the impact of unidirectional disclosure on greenwashing. However, how interactive disclosures affect greenwashing has not been fully explored. Given the background of the regulatory transformation of China's capital market, we use data from the Q&A boards of the Shenzhen Stock Exchange (SZSE) “Interactive Easy” and Shanghai Stock Exchange (SSE) “SSE e‐Interactive” online platforms to investigate the impact of interactive disclosure between firms and retail investors on greenwashing. We find that online platform interactions (OPIs) inhibit greenwashing. Moreover, such negative effects are more pronounced for firms with high‐quality internal controls, high executive shareholding, high analyst coverage, low financing constraints, and executives with overseas backgrounds. Overall, our research provides empirical evidence that OPIs improve capital market efficiency by inhibiting greenwashing.

Information disclosure transparency and shareholder wealth: Based on textual analysis

Based on the textual analysis of A-share listed non-financial 2017–2022 annual reports, this paper investigates the shareholder wealth effect of annual report disclosure transparency. It is found that the improvement of annual report disclosure transparency has a good mitigating effect on the degree of information asymmetry between the company and the market, which in turn positively affects shareholders' wealth; it is further found that the above effect is more significant in firms with higher analysts' attention and a higher proportion of institutional shareholders.

Institutional site visits and corporate innovation: The role of analyst coverage

By exploring additional information, both institutional investors' site visits and analyst coverage can stimulate corporate innovation. However, because analysts are more specialized in information exploration, their existence should weaken the effect of institutional site visits on corporate innovation. Using Chinese listed firms from 2009 to 2013, we investigate the effect of institutional site visits on firms' innovation output, with a focus on its heterogeneity from analyst coverage. We use patent citation records to accurately measure firms' innovation output. We find that institutional site visits significantly enhance corporate innovation among firms without analyst coverage, among firms with low analyst coverage, while this effect turns insignificant among firms with high analyst coverage. IV estimations confirm the causality. Additionally, we find that our major results exist only among non-SOEs, firms with a lower quality of information disclosure, firms with lower liquidity, and newly listed firms. Overall, this paper helps better understand the interaction between institutional site visits and analyst coverage regarding information exploration.

Analyst coverage and innovation information manipulation: evidence from listed companies in China

ABSTRACT This study examines the impact of analyst coverage on the strategic innovation information disclosure behaviour of Chinese A-share listed companies from 2011 to 2022. The findings suggest that firms with higher analysts coverage are more likely to manipulate their innovation information, especially positive innovation information manipulation (IIM), during the annual report disclosure process. Heterogeneity analysis suggests that the promotion effect is stronger in firms with high analyst ratings.

The role of sustainability integration into the corporate strategy – A perspective on analysts’ perceptions and buy recommendations

Sustainability is playing an increasingly important role in analysts' assessments of companies. Companies can address this importance through a sustainability strategy by choosing between a sustainability strategy independent from the corporate strategy (standalone sustainability strategy) or integrating sustainability into their corporate strategy (integrated strategy). For this purpose, we investigate the effects of different stages of sustainability integration into the corporate strategy on analysts' perceptions and buy recommendations. Our results show that analysts favour an integrated strategy over a standalone sustainability strategy. This finding is reflected in higher analysts’ perceptions of an integrated strategy. While a standalone sustainability strategy leads to fewer buy recommendations, an integrated strategy does not affect buy recommendations. We discuss our findings in relation to stakeholder theory and voluntary disclosure theory. Our study contributes to understanding how analysts perceive different stages of integrating sustainability into the corporate strategy. This understanding is relevant as analysts work as intermediaries in the capital market between companies and investors.

Do analysts’ earnings forecasts exclude earnings management? Evidence from audit adjustments

ABSTRACT Using audit adjustments to infer earnings management, we find that analysts’ earnings forecasts exclude a large amount of earnings management. The exclusion is greater for firms with larger institutional ownership and for firms with higher analyst following, where analysts have strong incentive to forecast economic earnings that are free of earnings management. Although auditors ultimately adjust the same earnings management from reported earnings, analysts are able to timely disseminate firms’ economic earnings to the market. Our study sheds light on analysts’ informational role in the capital markets and extends the boundary of the earnings management literature by investigating the earnings management adjusted by auditors instead of the earnings management remaining in reported earnings.

Corporate Digital Transformation and M&A Efficiency: Evidence Based on Chinese Listed Companies

In order to help enterprises to achieve high-quality development and improve the capital market regulatory policies by supporting with more factual basis from China, this paper conducts research on clarifying impact mechanism of digital transformation on M&A efficiency of listed companies. Taking the mergers and acquisitions of listed companies from 2007 to 2021 as a research sample, the influence mechanism of the digital transformation degree of companies on their M&A efficiency was studied. The research results show that the digital transformation of listed companies will improve their M&A efficiency. Digital transformation will reduce the degree of mispricing stocks of M&A companies, curb conflicts between managers and agents of M&A companies, and improve their M&A efficiency. Further research finds that the promotion effect of digital transformation on M&A efficiency is more significant in non-state-owned companies, with a higher degree of financing constraint and high analyst attention. In the future, regulatory authorities should actively promote the digital transformation of listed companies, curb mispricing and management agency problems in the capital market with digital governance, and improve the efficiency of mergers and acquisitions in the capital market. This paper not only provides a more factual basis on concrete case from China but also enriches the related empirical analysis on corporate digital transformation and M&A efficiency.

Foreign institutional ownership and Cross-Listing

Although foreign institutional ownership (FIO) is generally considered an important outcome of international cross-listings, most studies ignore the iterative nature of FIO—that is, FIO can also serve as a key determinant of cross-listings. Using a comprehensive dataset of international cross-listings of firms from 58 countries between 2001 and 2021, we examine the effect of FIO on firms’ cross-listing decision. Our results show that firms with a higher level of FIO before their cross-listing decision tend to have a significantly higher propensity to cross-list on foreign stock exchanges than firms with a lower level of FIO. Further analyses show that the positive association between FIO and cross-listings is weaker for firms with a better information environment, as evidenced by high analyst following, high media coverage, having a Big 4 auditor, and issuing management earnings forecasts. Additional evidence shows that FIO from countries with more developed institutions has a stronger effect on firms’ decision to cross-list. Taken together, our results are consistent with the argument that the presence of foreign institutional investors in firms signals their low information asymmetry and/or good corporate governance, thereby facilitating these firms’ international cross-listing decision.

Does corporate green innovation behaviour impact trade credit? Evidence from China

We explore whether and how corporate green innovation influences enterprises’ access to trade credit. Using Chinese corporations listed on the Shanghai and Shenzhen Stock Exchanges between 2014 and 2019 as the sample, we provide evidence that corporate green innovation can significantly enhance enterprises’ trade credit accessibility. This finding remains robust after undertaking various robustness checks. Channel analysis shows that upstream suppliers’ competition intensified by downstream buyers’ green innovation behaviours serves as a crucial linkage between corporate green innovation and trade credit. Heterogeneity analyses indicate that the augmenting impact of green innovation on trade credit accessibility is more pronounced in non-state-owned enterprises, large-size firms, and enterprises with high analyst coverage. Our findings contribute to the literature concerning both corporate green innovation and trade credit, and support enterprises and policymakers to promote green innovation, improve financing conditions, and drive sustainable development.

Retail investor attention and corporate environmental performance: Evidence from china

Utilizing the data collected from all Chinese-listed companies from 2010 to 2019, this study investigates the relationship between retail investor attention and corporate environmental performance. Our analysis shows that investor attention is positively and significantly related with corporate environmental performance, which is robust to various tests. We further find that the positive relationship is more pronounced for firms with more investor inquires, as well as those with higher analyst and media coverage. The study contributes to the existing literature on the drivers of corporate environmental performance, and highlights the crucial role that retail investors play in shaping firm environmental activities.

Institutional investor horizon and stock price synchronicity: Do product market competition and analyst coverage matter?

This paper provides new insights into the relation between institutional investment horizon and stock price synchronicity and investigates whether this relationship depends on the intensity of product market competition and analyst coverage. Based on a sample of French listed companies, we find that long-term (short-term) institutional investors are associated with lower (higher) stock price synchronicity. The results also show that the negative effect of long-term institutional investors is more accentuated for firms in less competitive markets and with high analyst coverage. An additional analysis shows that the synchronicity reduction effect does not vary during the financial crisis. Overall, these findings suggest that unlike their short-term counterparts, long term investors reduce asymmetric information and help disseminate firm-specific information into stock prices.

IRS Private Letter Rulings: Initial Evidence on Determinants and Consequences

AbstractThis study examines the determinants of firms' requests for Private Letter Rulings (PLRs) from the US Internal Revenue Service (IRS) and their impact on firms' cash holdings. Our results show that PLR requests tend to be made by firms with more active tax planning, more acquisitions, higher analyst following, higher leverage, and less in‐house tax expertise. We also show that firms with IRS audit red flags are less likely to request a PLR. We use a difference‐in‐difference approach to assess changes in cash holdings following PLR requests and report a decrease in cash holdings for PLR firms, consistent with the notion that PLRs act to reduce tax uncertainty. Our study provides the first empirical evidence about the determinants of PLR requests and complements prior work on tax uncertainty and cash holdings (Hanlon, Maydew and Saavedra, 2017).

Firms’ Engagement in Poverty Alleviation Campaign and Stock Price Crash Risk: Evidence from China

ABSTRACT This study explores the relationship between firms’ engagement in poverty-alleviation campaigns and stock price crash risk. We use a large sample of Chinese firms listed on Shanghai and Shenzhen stock markets and find that firms’ engagement in poverty alleviation campaigns is positively associated with future stock price crash risk. Moreover, the positive relationship between firms’ engagement in poverty alleviation campaigns and crash risk is more pronounced for state-owned enterprises and firms with relatively concentrated ownership. However, this is less pronounced for those with higher analyst and media coverage. Our results are consistent with the agency theory, suggesting that engaging in poverty alleviation campaign may facilitate managers’ bad news hoarding behavior and increase stock price crash risk.

The impact of corporate violations on charitable donation behavior.

The present study investigated the impact of corporate violations on corporate charitable donation behavior and the heterogeneity influences played by corporate ownership type, analyst attention and information transparency. This study analyzed 3,715 non-financial companies in Chinese A-shares from 2011 to 2020 using panel data. The impact of corporate violations on corporate charitable donations was examined by using Ordinary Least Squares, instrumental variables two-stage least squares and propensity score matching method. Consequently, the following conclusions are presented. First, corporate violations are significantly positively correlated with the level of corporate charitable donations. Second, among the companies with high analyst attention, high information transparency, or non-state-owned nature, the positive impact of enterprise violations on charitable donations is greater. These findings suggest that charitable giving may be used by some businesses as an undesirable tool to conceal their irregularities. No study has been conducted regarding the influence of corporate violations on corporate charitable donations in China. This study is a pioneering study that seeks to give insights into the link between these variables in the context of China, which has practical implications for gaining insights into corporate charitable giving in China, as well as identifying and curbing "hypocritical" corporate charitable donation behavior.

Green finance policy and digital transformation of heavily polluting firms: Evidence from China

In this paper, we use the “Green Credit Performance Evaluation of Banking Depository Financial Institutions” implemented by the People's Bank of China as a quasi-natural experiment and a difference-in-differences (DID) approach to examine the impact of green finance policy on the digital transformation of heavily polluting firms. The results show that firms' digital transformation is effectively driven by green finance policy. The policy effect is more pronounced among low financing-constrained firms, state-owned firms, and firms with high analyst coverage. Furthermore, green finance policy influences the digital transformation of firms primarily by increasing digital outcomes and guiding management's strategic direction.

Annual report readability and stock return synchronicity: Evidence from India

This study investigates the relationship between the comprehensibility of a firm’s annual report and its stock return synchronicity in the Indian market. The study employs the readability of annual reports as a measure for the cost of information processing. The findings suggest that firms with more readable annual reports tend to display higher stock return synchronicity. This relationship implies that more legible financial disclosures are associated with more efficient and transparent capital markets. Additionally, the research discovered that the relationship between readability and stock return synchronicity is particularly pronounced for companies with high institutional investment, high analyst coverage, and lower information asymmetry. The sample size of the study encompasses NSE 500 companies for the period 2015–2016 to 2019–2020.