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Analyst earnings forecast precision and local advantage: evidence from American depositary receipt firms

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  • Fernando Comiran
  • Subprasiri Siriviriyakul

Abstract

Prior research has documented a finding that local analysts provide more accurate earnings forecasts than nonlocal analysts in many settings. However, little is known about local and nonlocal analysts’ relative earnings forecast abilities for ADR stocks. In this study, we find that the local advantage disappears for ADR stocks and that nonlocal analysts in fact outperform local ones in this case. We investigate the source of this ‘local disadvantage’ and find evidence against hypotheses based on accounting standards and exchange rates. We document that the local advantage decreases with increased investor interest in foreign firms, consistent with our nonlocal investors’ interest hypothesis.

Suggested Citation

  • Fernando Comiran & Subprasiri Siriviriyakul, 2019. "Analyst earnings forecast precision and local advantage: evidence from American depositary receipt firms," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 59(S1), pages 481-510, April.
    • Handle: RePEc:bla:acctfi:v:59:y:2019:i:s1:p:481-510
    DOI: 10.1111/acfi.12311
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    Cited by:

    1. Xiaoxiao Song, 2019. "Effects Of Analysts’ Country Familiarity On Forecast Behavior: Evidence From Chinese Cross-Listed Firms In The United States," Accounting & Taxation, The Institute for Business and Finance Research, vol. 11(1), pages 35-46.
    2. Xie, Lingmin & Chen, Zhian & Li, Donghui & Tan, Hongping, 2022. "Foreign analysts and managerial investment learning from stock markets," Journal of Multinational Financial Management, Elsevier, vol. 64(C).
    3. Young‐Soo Choi & Svetlana Mira & Nicholas Taylor, 2022. "Local versus foreign analysts' forecast accuracy: does herding matter?," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 62(S1), pages 1143-1188, April.
    4. Yunqi Fan & Yanwei Zhang, 2024. "Consequences of firm-specific stock price crashes on analyst forecasts: Evidence from China," Palgrave Communications, Palgrave Macmillan, vol. 11(1), pages 1-15, December.

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