The information effect of securities analysts’ hometown network capital
(2.Institute of Accounting and Finance, Shanghai University of Finance and Economics, Shanghai, China 200433)
(3.Antai College of Economics and Management, Shanghai Jiao Tong University, Shanghai, China 200030)
【Abstract】Securities analysts are the backbone of transmitting capital market information and influencing resource allocation. However, the uncertainty in the development of China’s capital market and the lagging of public governance mechanisms have led companies to rely on relational contracts formed by long-term transactions. Since each transaction of a relational contract has its own particularity, one must be embedded within the network of relationships to obtain information between the parties, in order to evaluate a company’s operating activities and value. Therefore, this paper explored the impact of social capital formed by analysts embedded in the company’s regional relationship network (herein referred to as “hometown network capital”) on the accuracy of analyst forecasts. Specifically, based on the research report released by 6970 analyst teams in China’s capital market from 2006 to 2016, this paper achieved the following findings. (1) Analysts are more accurate in predicting the profits of the listed companies where their household registration is located, with an average error being 3% lower than that of other analysts. (2) In the area where the social relationship network is more complex and social capital is more important, analysts’ hometown network capital has a greater comparative information advantage. (3) Research reports released by analysts with hometown network capital have led to stronger short-term and long-term market reactions. In addition, this paper found that the information advantage of analysts’ hometown network capital is reflected not only in the acquisition of private information, but also in the interpretation of public information. At the same time, analysts are more likely to be invited to participate in the research activities of hometown listed companies. The research contributions of this paper are as follows. Firstly, it enriches the relevant research on the social relationship network of securities analysts. Different from the direct social relations between analysts and executives of listed companies, the essence of hometown network capital of analysts concerned in this paper is a kind of regional social capital of analysts, whose scope includes direct social relations and indirect social relations, thus expanding the research field of analysts’ social relations. Secondly, it supplements the relevant literature about the influence of geographic distance on information transmission mechanism. By comparing the differences between social network distance and geographic distance in information acquisition, this paper provides a new research dimension for understanding the influence of distance on information transmission. Finally, because the transaction behavior and content of a company under the relational transaction mode are dependent on the relationship network of the transaction subject, it is difficult for the analysts as an information intermediary to be independent of the company’s relationship network. With the emergence of the sci-tech innovation board and the registration system, the capital market operation system with information disclosure as the core needs to be established urgently.
【Keywords】 analysts; hometown network capital; private information; forecast accuracy;