PHBS received a visit from Qianqian Du, an Assistant Professor of Finance at Shanghai Advanced Institute of Finance to present the results of her latest research. Professor Du received her degree from University of British Columbia and focuses on private equity, financial analysts, social networks, and corporate governance. Her work has appeared in journals such as Review of Finance and Economics Letters, and Small Business Economics. Professor Du has won China International Conference in Finance Best Paper Award and The Chinese Finance Association Award.
Her latest work, “Standing out from the Crowd: the Outlier's Effect on Corporate Governance” examines the real effects of outliers’ opinions in the context of extreme analyst optimism and corporate governance.
The conclusion to her study was that the most vocal and extreme opinions are very common. Whether such opinions are reflective of private information or not, they may still exert their influences on others and cause real consequences. The paper documents in detail the economic consequences of outliers. Their opinions actually shape the opinion of the group and other market participants.
Finally, she found that the extremely optimistic forecast leads to a greater tendency for firms to manage earnings through manipulating accounting accruals and real activities. Private information and conflict of interest are less likely to be the main reason for extremism when behavioral biases are at play.
Written by Hicham Lefnaoui
