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Does individual investors’ dividend tax influence analyst forecast? Evidence from a quasi-natural experiment in China

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  • Liu, Guangqiang
  • Liu, Tianbao

Abstract

Taking the implementation of dividend tax reform (DTR) for individual investors as a quasi-natural experiment, this paper analyzes the effect of individual investors’ dividend tax on analyst forecast using difference-in-differences model. The results show a significant decrease in the accuracy of analysts’ forecasts after the implementation of DTR, mainly exacerbating the optimistic bias of analysts. Further analysis indicates that this effect is more pronounced for firms with poorer information quality and firms with less private information. Our study provides theoretical support and empirical evidence for regulators concerned with information asymmetry of capital market and investor protection.

Suggested Citation

  • Liu, Guangqiang & Liu, Tianbao, 2022. "Does individual investors’ dividend tax influence analyst forecast? Evidence from a quasi-natural experiment in China," Finance Research Letters, Elsevier, vol. 50(C).
    • Handle: RePEc:eee:finlet:v:50:y:2022:i:c:s1544612322004494
    DOI: 10.1016/j.frl.2022.103263
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    References listed on IDEAS

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    Cited by:

    1. Liu, Xingyu & Kok Loang, Ooi, 2023. "Analysts’ forecast optimism and cash holding: Evidence from China," Finance Research Letters, Elsevier, vol. 57(C).

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    More about this item

    Keywords

    Dividend tax reform; Analyst forecast; Individual investor; Analyst visit; Information quality;
    All these keywords.

    JEL classification:

    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy
    • K34 - Law and Economics - - Other Substantive Areas of Law - - - Tax Law

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