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Interlock Concentration and Analyst Forecast Accuracy: Value Implications of Interlock

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  • Jie Han
  • Ling Liu

Abstract

From the perspective of information commonalities among firms with director interlock relationships, this study mainly investigates the outcomes of earnings forecasts by analysts who choose to concentrate on interlocked firms (analysts following both a firm and its interlocked partner firm in their research portfolio). Using interlocked A‐share firms listed in the Chinese Shanghai and Shenzhen Stock Exchanges from 2008 to 2013 as samples, we empirically find that analysts who concentrate on interlocked firms produce more accurate earnings forecasts than analysts who do not. In additional analysis, we also find that analysts with an interlock concentration provide superior earnings forecast quality for other non‐interlocked firms in their research portfolios. Finally, through examining the market reaction to interlocked firms, we find that analysts with an interlock concentration provide new information and improve information efficiency for the capital market.

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  • Jie Han & Ling Liu, 2019. "Interlock Concentration and Analyst Forecast Accuracy: Value Implications of Interlock," Australian Accounting Review, CPA Australia, vol. 29(1), pages 64-79, March.
    • Handle: RePEc:bla:ausact:v:29:y:2019:i:1:p:64-79
    DOI: 10.1111/auar.12222
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    Cited by:

    1. He Xiao & Jianqun Xi, 2023. "The Impact of Institutional Cross‐ownership on Corporate Tax Avoidance: Evidence from Chinese Listed Firms," Australian Accounting Review, CPA Australia, vol. 33(1), pages 86-105, March.

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