Professor Dongmin Kong, a researcher of the Base, has published a collaborative paper titled "Do foreign investors crowd out sell-side analysts? Evidence from China" in The Financial Review

Abstract:

This paper examines whether foreign investors (FIs) affect the information production of analysts. Based on China's stock market, we find that FIs significantly reduce analysts’ coverage. Such negative association is more pronounced in firms with a high level of governance and information disclosure and varies with analyst characteristics. We also identify two possible economic mechanisms: the information channel and the governance channel. Further tests suggest that as FIs crowd out analysts, the number of research reports and brokerage site visits decreased, but analyst forecast accuracy improved, indicating that the demand and supply of information are generally in equilibrium. We further address the endogeneity issue using a change-on-change analysis and a quasi-natural experiment, the Shanghai–Hong Kong Stock Connect (S-HKSC), and the results still hold. Overall, our results present evidence of potential information production by FIs, providing policy implications and highlighting the positive effect of China's open-door policy in capital markets.

Link：https://doi.org/10.1111/fire.12307

Teacher profile

Dongmin Kong, Wen LAN Distinguished Professor and doctoral Supervisor, School of Finance, Zhongnan University of Economics and Law. In 2015, he was selected into the "National Key Talent Plan". Research interests: Chinese capital market, corporate finance. Currently published in Journal of Law and Economics, Review of Finance, Journal of Environmental Economics and Management, Contemporary Accounting Research, Journal of Corporate Finance, Journal of Banking and Finance,China Economic Review,Economic Research Journal, Management World, Journal of Financial Research, China Economic Journal, and hosted a number of National Natural Science funds. Currently, he is also a member of Financial Management Committee of China Society of Management Modernization. National Natural Science Foundation of China Communication Evaluation expert; Member of the editorial Board of Securities Market Herald,Journal of Zhongnan University of Economics and Law, Journal of Accounting and Economics, Luojia Management Review, Financial Science, Contemporary Accounting Review, Jianghan Academic; China Finance Review International, Associate Editor; He also serves as an anonymous reviewer of several authoritative journals at home and abroad, such as Economic Research Journal, Management World and Journal of Financial Research.