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Political patronage and analysts’ forecast precision

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

Journal of Contemporary Accounting and Economics, 2018, vol. 14, issue 3, 307-320

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.

Keywords: Analysts; Forecast precision; Political patronage; Malaysia (search for similar items in EconPapers)
JEL-codes: G24 G34 G38 (search for similar items in EconPapers)
Date: 2018
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Journal of Contemporary Accounting and Economics is currently edited by Agnes C.S. Cheng, P. Clarkson, F.A. Gul, Zoltan Matolcsy, Dan Simunic and Ben Srinidhi

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