Analysts’ Reputational Concerns, Self-Censoring and the International Dispersion Effect

36 Pages Posted: 6 Jan 2017

See all articles by Chuan-Yang Hwang

Chuan-Yang Hwang

Nanyang Technological University (NTU)

Yuan Li

Loughborough University

Date Written: August 8, 2016


Stocks with higher forecast dispersion earn lower future returns and have a greater upward bias in the mean reported earnings forecast in the international markets. Both phenomena are stronger in countries with more transparent information environments, more developed stock markets, stronger investor protection, greater capital openness, and more intense usage of analysts’ earnings forecasts. Using the 1997−98 Asian financial crisis as a natural experiment, we find that both phenomena become weaker post crisis in Malaysia, which imposed capital controls, relative to Thailand and South Korea, which opened up their financial markets to foreigners. These results suggest that analysts in countries with greater demand for their forecasts and hence greater concerns for reputations are more likely to self-censor their low forecasts, which leads to a stronger dispersion-bias relation and a stronger dispersion effect.

Keywords: analysts’ incentives; analysts’ reputational concerns; self-censoring; the dispersion effect; international markets

Suggested Citation

Hwang, Chuan-Yang and Li, Yuan, Analysts’ Reputational Concerns, Self-Censoring and the International Dispersion Effect (August 8, 2016). Available at SSRN: or

Chuan-Yang Hwang (Contact Author)

Nanyang Technological University (NTU) ( email )

Singapore, 639798
65-67905003 (Phone)
65-6791-3697 (Fax)

Yuan Li

Loughborough University ( email )

Ashby Road
Nottingham NG1 4BU
Great Britain

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