Was Corporate Profitability of Chinese Listed Companies in the U.S. Affected by International Analyst Coverage?

Abstract

Abstract:

By collecting data from the official website of depositary banks that issues American Depositary Receipt (ADR) and WRDS database from Wharton Business School, we study the firms of Chinese ADRs listed on the NASDAQ and NYSE from 1996 to 2011 and provide an empirical evidence for the impact of analyst coverage and recommendation on these firms' profitability. The results demonstrate that, analyst coverage has no significant impact on profitability whereas analyst good recommendation has a positive correlation with profitability. Our endogeneity test supports the above conclusion. The robustness test suggests that this positive affect of analyst good recommendation on profitability was enacted after Sarbanes-Oxley Act. This conclusion is robust when the profitability indicator, return on assets is replaced by return on equity.

Key words: analyst coverage, analyst recommendation, corporate profitability, American depositary receipt

Li Shuangyan. Was Corporate Profitability of Chinese Listed Companies in the U.S. Affected by International Analyst Coverage?[J]. , 2016, 28(6): 42-51.

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