Common Ownership and Analyst Forecasts

54 Pages Posted: 7 Jul 2021

See all articles by Qiang Cheng

Qiang Cheng

Singapore Management University

Shuqing Luo

University of Hong Kong

Jinping Zhang

Business School, National University of Singapore

Date Written: June 23, 2021


We examine the effect of the common ownership relation between brokerage houses and the firms covered by their analysts (referred to as co-owned brokerage houses, co-owned firms, and connected analysts, respectively) on analyst forecast performance. Common ownership can help the connected analysts to have better access to co-owned firms, leading to higher quality analyst research. However, common owners have incentives for higher valuation for the co-owned firms, and thus can exert pressure on the connected analysts to issue optimistically biased research reports for these firms. We find that common ownership improves analyst forecast accuracy. This result is robust to a difference-in-differences design that exploits exogenous shocks to common ownership. The effects vary systematically with the quality of alternative sources of information that analysts can access for the co-owned firms. Overall, our paper contributes to the literature by documenting that common ownership can facilitate information communication.

Keywords: common ownership, analyst forecasts, institutional environments

JEL Classification: G23, G32, M40

Suggested Citation

Cheng, Qiang and Luo, Shuqing and Zhang, Jinping, Common Ownership and Analyst Forecasts (June 23, 2021). Available at SSRN: or

Qiang Cheng (Contact Author)

Singapore Management University ( email )

60 Stamford Road
Singapore, 178900

Shuqing Luo

University of Hong Kong ( email )

1216 K. K. Leung Building
Hong Kong, 119245
Hong Kong
852-39171533 (Phone)

Jinping Zhang

Business School, National University of Singapore ( email )

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