The effect of incidental name similarity on favoritism in the Chinese financial market

Abstract

Abstract Incidental similarities between individuals can sway professional judgment, sometimes resulting in people overstepping legal or ethical boundaries. Recent research on the US financial sector indicates that incidental name similarities between CEOs and securities analysts induce favoritism and lead to more accurate earnings forecasts, likely by facilitating unfair private information disclosure. This study investigates similar phenomena in China using richer datasets, including records of face-to-face interactions between analysts and company executives during corporate site visits. Interestingly, while the results confirm that Chinese analysts who share surnames with company executives exhibit favoritism, this favoritism manifests as overly optimistic earnings forecasts after corporate site visits. This is particularly notable with less common surnames. Our findings highlight the cultural specificity of surname-driven biases in social interactions.