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Typhoon strikes, distracted analyst and forecast accuracy: Evidence from China

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  • Liu, Na
  • Chen, Wenchuan
  • Wang, Jianyong
  • Shi, Huaizhi

Abstract

This paper investigates the effect of typhoon strikes on analysts' forecast accuracy in the context of China. We find that analysts' exposure to typhoon strikes results in decline in their forecast quality. We attribute this to analysts' limited attention by providing evidence that: (1) analysts strategically allocate their attention to firms with more extensive institutional ownership; (2) analysts experiencing repeated typhoons would be less affected by the strikes; (3) analysts' forecasts on firms shocked by typhoons document a greater decline of quality. Our finding provides a plausibly causal effect of climate disaster on analyst forecast accuracy with the staggered strikes of the typhoon.

Suggested Citation

  • Liu, Na & Chen, Wenchuan & Wang, Jianyong & Shi, Huaizhi, 2023. "Typhoon strikes, distracted analyst and forecast accuracy: Evidence from China," Finance Research Letters, Elsevier, vol. 51(C).
    • Handle: RePEc:eee:finlet:v:51:y:2023:i:c:s1544612322005360
    DOI: 10.1016/j.frl.2022.103359
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    References listed on IDEAS

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    10. Gao, Haoyu & Wen, Huiyu & Yu, Shujiaming, 2022. "Weathering information disruption: Typhoon strikes and analysts’ forecast dispersion," Finance Research Letters, Elsevier, vol. 49(C).
    11. Kong, Dongmin & Lin, Zhiyang & Wang, Yanan & Xiang, Junyi, 2021. "Natural disasters and analysts' earnings forecasts," Journal of Corporate Finance, Elsevier, vol. 66(C).
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    Cited by:

    1. Wang, Qilin & Huang, Yehua & Zhao, Mengyao & Liu, Jinzhao, 2024. "Do natural disasters hinder analysts’ information production of non-affected firms?," Economics Letters, Elsevier, vol. 234(C).

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