Abstract

http://ssrn.com/abstract=2225722
 


 



Cultural Proximity and the Processing of Financial Information


Qianqian Du


Hong Kong Polytechnic University

Frank Yu


China Europe International Business School

Xiaoyun Yu


Indiana University - Kelley School of Business - Department of Finance; China Academy of Financial Research (CAFR)

July 15, 2016


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.

Number of Pages in PDF File: 43

Keywords: Culture, Forecast Accuracy, Information Asymmetry, Demographic Economics, Financial Analysts

JEL Classification: G14; G24; F65; J15; J24


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Date posted: February 28, 2013 ; Last revised: July 16, 2016

Suggested Citation

Du, Qianqian and Yu, Frank and Yu, Xiaoyun, Cultural Proximity and the Processing of Financial Information (July 15, 2016). Available at SSRN: http://ssrn.com/abstract=2225722 or http://dx.doi.org/10.2139/ssrn.2225722

Contact Information

Qianqian Du
Hong Kong Polytechnic University ( email )
9/F, Li Ka Shing Tower
The Hong Kong Polytechnic University
Hong Kong, Hung Hom, Kowloon M923
China
Fang Yu
China Europe International Business School ( email )
Shanghai-Hongfeng Road
Shanghai 201206
Shanghai 201206
China
Xiaoyun Yu (Contact Author)
Indiana University - Kelley School of Business - Department of Finance ( email )
1309 E. 10th St.
Bloomington, IN 47405
United States
812-855-3521 (Phone)
812-855-5875 (Fax)

China Academy of Financial Research (CAFR)
1954 Huashan Road
Shanghai P.R.China, 200030
China

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