Can analysts reduce corporate information asymmetry? Moderating role of government information transparency

Purpose This study aims examine how government information transparency moderates the relationship between analyst coverage and corporate information asymmetry. While both mechanisms are known to reduce information asymmetry, their joint and potentially nonlinear effects remain underexplored. This study aims to uncover whether institutional transparency enhances or substitutes for the information role of analysts, thereby contributing to a deeper understanding of the interaction between formal and market-based governance mechanisms in emerging capital markets. Design/methodology/approach Using a panel dataset of Chinese A-share listed firms from 2007 to 2023, we use a fixed-effects model to assess the moderating role of government information transparency in the association between analyst coverage and information asymmetry. Robustness checks include alternative model specifications, endogeneity controls and heterogeneity analyses across firm transparency levels and accounting quality. Findings Analyst coverage significantly mitigates corporate information asymmetry. However, the moderating effect of government transparency is nonlinear: the marginal benefit of analyst coverage initially strengthens but diminishes as transparency increases, indicating a shift from complementarity to partial substitution. The effects are more pronounced among firms with lower intrinsic transparency and higher accounting quality, reflecting the conditional effectiveness of market intermediaries. Originality/value This study extends institutional theory by revealing the dynamic equilibrium between formal disclosure institutions and market-based information mechanisms. It provides new empirical evidence on how government transparency shapes the efficacy of analyst coverage and offers policy implications for enhancing capital market efficiency through coordinated transparency and analyst governance reforms.