Does corporate internationalization affect analysts’ earnings forecast bias? Evidence from China

Linjiang Wang, Guiling Zhang, Xu Lou and Fei Guo

Research in International Business and Finance, 2024, vol. 72, issue PA

Abstract: Using manually collected firm-level data on foreign subsidiaries, we examine the impact of internationalization on analysts’ earnings forecast bias in Chinese corporations. We find that analysts’ earnings forecast bias is stronger among multinational firms when compared with domestic firms, and the higher the level of internationalization, the greater the bias in analysts’ earnings forecasts. Various methods, such as the Heckman two-stage least squares, propensity score matching, and difference in difference tests, are employed to ensure the robustness of our results. The mechanism analysis indicates that oversea business complexity, information asymmetry and analysts’ experience are critical factors that moderate the relationship between international diversification and forecast bias. These findings have important implications for multinational corporations, analysts, and investors.

Keywords: Internationalization; Complexity; Information asymmetry; Analysts competence; Analysts’ earnings forecast bias (search for similar items in EconPapers)
JEL-codes: F21 G34 M16 M41 N25 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:72:y:2024:i:pa:s0275531924002988

DOI: 10.1016/j.ribaf.2024.102505

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