Do Analysts' Social Ties Affect the Textual Information in Their Reports? Evidence from China

We develop insights into how analysts' social ties affect their objectivity and the information content of reports, based on quantitative measures of social ties and textual information content. Using a sample ranges from January 2006 to December 2016 in China, we show that with wide social ties to fund managers, analysts' ability to burnish their reputation with informative reports and to achieve career success with optimistic stock ratings is enhanced. Further evidence indicates that the trade-off between reputation and career success is dynamic. Specifically, after being elected as New Fortune stars, analysts attach more importance on textual information and are less subjective on stock ratings. These findings are robust across various robustness tests. Overall, our evidence highlights the role of social ties in the information-dissemination process in China A-share stock markets from the perspective of analysts and fund managers.