JIE Xiaoxiao：Firm Size, Analyst Selection Bias and Firm Performance: Evidence from Acquiring Companies

Abstract：After investigating 2769 Chinese share acquisitions, we find that the relationship between analyst following and M&A announcement effect is significantly negative, however, the significance disappears after we control firm size.Further investigation shows that this negative relationship is caused by analysts preference of large firms, and it provides evidence on Chinese analysts selection bias.Furthermore, analyst following and acquiring companies long term performance are positively related, which proves that analysts have strong value discovery function for firms long term performance.We suggest to using Residual Analyst Coverage instead of raw number of analyst following, as CSRC speeds up the procedure on registration system reform and broadens OTC, GEM and SME markets.We also suggest that CSRC should specify analyst following, broaden institutional investors investment targets and promote the internationalization of A-share market.

Key words： Financial Analyst    Selection Bias    M&A Performance    Firm Size

source:Finance & Trade Economics ,No.11,2015