The Role of Financial Analysts in Alleviating Information Asymmetry and Promoting Capital Market Efficiency
DOI:
https://doi.org/10.54691/6nwdba16Keywords:
Financial analysts, information asymmetry, capital market efficiency, mispricing, earnings forecasts, corporate governanceAbstract
Financial analysts reduce information asymmetry and improve the efficiency of capital markets by gathering, analyzing and spreading firm-specific and industry-wide information. Assess the extent to which support from analyst coverage, earnings forecasts, investment recommendations and industry research has enabled external investors to understand complex corporate disclosures better and incorporate firm-specific information into stock prices. Previous research has proposed that the activity of analysts can facilitate price discovery, reduce valuation risk and improve capital allocation under conditions of weak corporate disclosure. Analysts' Information Services are subject to factors such as disclosure quality, corporate governance, analyst independence and conflicts of interest. Optimism bias, herd behavior and investment banking incentives may lead to lower analysis and more market noise. Therefore, the analysts in this study are not passive disseminators of corporate information but active participants in the price-setting mechanism. Tighten regulations on disclosure and safeguard the independence of analysts to improve market information efficiency.
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