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Investor protection, aggregate changes in profit margins and forecasts of growth in GDP: international evidence

Author

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  • Neil Fargher

    (The Australian National University)

  • Lijuan Zhang

    (The Australian National University)

Abstract

This study draws on the investor protection literature to examine whether differences in a country’s level of investor protections help explain cross-country variation in the extent to which macroeconomic forecasters consider aggregate changes in corporate profit margins when forecasting growth in GDP. We find that economies with stronger levels of investor protection have a higher association between changes in aggregate profit margin and GDP growth. Using a unique sample of analysts’ GDP forecasts from 28 countries, we find that economies with stronger levels of investor protection have a lower association between changes in aggregate profit margin and errors in forecasts of GDP growth.

Suggested Citation

  • Neil Fargher & Lijuan Zhang, 2024. "Investor protection, aggregate changes in profit margins and forecasts of growth in GDP: international evidence," Review of Accounting Studies, Springer, vol. 29(4), pages 3497-3533, December.
    • Handle: RePEc:spr:reaccs:v:29:y:2024:i:4:d:10.1007_s11142-023-09785-6
    DOI: 10.1007/s11142-023-09785-6
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