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Political patronage and analysts’ forecast precision

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  • Abdul Wahab, Effiezal Aswadi
  • How, Janice
  • Park, Jason
  • Verhoeven, Peter

Abstract

We test whether the channel by which the government plays the role of political patron to selected firms influences analysts’ forecast precision in Malaysia. Correcting for analysts’ self-selection bias, we find a negative relation between analysts’ forecast errors and the social dimension of political patronage, as proxied by government-controlled institutional ownership. The reverse is found for the economic dimension of political patronage, as proxied by the percentage shareholding of government-linked corporations. We find no evidence that the personal dimension of political patronage influences analysts’ forecast precision.

Suggested Citation

  • Abdul Wahab, Effiezal Aswadi & How, Janice & Park, Jason & Verhoeven, Peter, 2018. "Political patronage and analysts’ forecast precision," Journal of Contemporary Accounting and Economics, Elsevier, vol. 14(3), pages 307-320.
    • Handle: RePEc:eee:jocaae:v:14:y:2018:i:3:p:307-320
    DOI: 10.1016/j.jcae.2018.07.003
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    More about this item

    Keywords

    Analysts; Forecast precision; Political patronage; Malaysia;
    All these keywords.

    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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