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Market Segmentation and Differential Reactions of Local and Foreign Investors to Analyst Recommendations

Chunxin Jia1; Yaping Wang1; Wei Xiong2

1 Guanghua School of Management, Peking University · 2 Princeton University, CUHK Shenzhen, and NBER

Review of Financial Studies 2017

This paper uses segmented dual-class shares of Chinese firms—A shares traded in mainland China by local investors and H shares traded in Hong Kong by foreign investors—to document a rich pattern in the differential reactions of local and foreign investors to analyst recommendations. This pattern reveals that social connections between analysts and investors affect investor reactions to analyst recommendations. Because of the investors’ differential reactions, analyst recommendations may exacerbate, rather than attenuate, the market segmentation between the two share classes. Received January 28, 2016; editorial decision October 23, 2016 by Editor Robin Greenwood.

DOI
10.1093/rfs/hhx010
Volume
30 (9)
Pages
2972-3008
Language
en
Export
BibTeX
Sources
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