Does public corruption affect analyst forecast quality?

Sadok El Ghoul, Omrane Guedhami, Zuobao Wei and Yicheng Zhu

Journal of Banking & Finance, 2023, vol. 154, issue C

Abstract: Using U.S. Department of Justice (DOJ) data on corruption convictions of government officials, we study the effect of public corruption on analyst forecast quality. We find that analyst earnings forecasts for firms headquartered in more corrupt states are less accurate. Our results are robust to endogeneity checks and several alternative corruption measures. In our cross-sectional analysis, we find that the negative effect of corruption on analyst forecast accuracy is more pronounced in government contractor firms and firms with weaker internal governance or external monitoring. We further identify two channels through which corruption negatively influences analyst forecast accuracy: Firms in more corrupt states exhibit lower earnings quality and issue less frequent management guidance.

Keywords: Public corruption; Analyst forecast quality; Information asymmetry; U.S. States (search for similar items in EconPapers)
JEL-codes: D73 D82 G17 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:154:y:2023:i:c:s0378426623000845

DOI: 10.1016/j.jbankfin.2023.106860

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