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Do firms’ exports affect analysts’ forecast errors?

Author

Listed:
  • Fu Xin
  • Shangkun Liang
  • Jiemin Dai
  • Xiaorong Du

Abstract

This paper aims to provide insights into the forces and constraints that shape the forecast errors of local analysts when a firm enjoys both domestic and foreign earnings. By applying a unique hand-collect export dataset of Chinese listed firms, the key finding shows that the forecast earnings of exporting firms issued by local analysts deviate more from the actual earnings than those for non-exporting firms. On the contrary, foreign analysts exhibit an informational advantage to local analysts when forecasting the earnings of exporting firms. A two-stage selection model and propensity score matching procedure are applied for correcting the endogeneity problem in a corporate exporting decision. A detailed investigation shows that the forecast errors of local analysts increased significantly during the financial crisis of 2008. Also, the forecast errors of foreign analysts were smaller after the IFRS were been adopted in China than before. Our findings indicate that the accuracy of local analysts may suffer from the macro-economic environment in an export-driven nation.

Suggested Citation

  • Fu Xin & Shangkun Liang & Jiemin Dai & Xiaorong Du, 2017. "Do firms’ exports affect analysts’ forecast errors?," China Journal of Accounting Studies, Taylor & Francis Journals, vol. 5(1), pages 123-150, January.
    • Handle: RePEc:taf:rcjaxx:v:5:y:2017:i:1:p:123-150
    DOI: 10.1080/21697213.2016.1252087
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