 Natural disasters and analysts' earnings forecastsDongmin Kong, Zhiyang Lin, Yanan Wang and Junyi Xiang Journal of Corporate Finance, 2021, vol. 66, issue C Abstract: The effects of natural disasters on capital markets have been investigated by limited evidence even though these calamities bring considerable damages or loss of life. To fill this gap, we investigate the impacts of natural disasters, particularly earthquakes, on security analysts' earnings forecasts for affected firms in China. We obtain three key findings. First, analysts' optimism significantly decreases for firms located in neighborhood areas. Second, earthquakes do not significantly affect firm earnings and stock returns, thereby indicating that post-earthquake analyst pessimism is not based on rational judgment. Third, media attention promotes irrational pessimism among analysts, and post-earthquake pessimism is a result of heuristics bias attributable to psychological shocks. However, analysts correct the bias after initial irrational forecasts. Taken together, our findings contribute to the broader psychology and economics literature on the effects of natural disasters on analyst forecasts. Keywords: Natural disasters; Earthquakes; Media attention; Pessimism; Analyst forecasts (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:66:y:2021:i:c:s0929119920303047 DOI: 10.1016/j.jcorpfin.2020.101860 Access Statistics for this article Journal of Corporate Finance is currently edited by A. Poulsen and J. Netter More articles in Journal of Corporate Finance from Elsevier |
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