Investor protection, aggregate changes in profit margins and forecasts of growth in GDP: international evidence

Neil Fargher () and Lijuan Zhang
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Neil Fargher: The Australian National University
Lijuan Zhang: The Australian National University

Review of Accounting Studies, 2024, vol. 29, issue 4, No 14, 3497-3533

Abstract: Abstract This study draws on the investor protection literature to examine whether differences in a country’s level of investor protections help explain cross-country variation in the extent to which macroeconomic forecasters consider aggregate changes in corporate profit margins when forecasting growth in GDP. We find that economies with stronger levels of investor protection have a higher association between changes in aggregate profit margin and GDP growth. Using a unique sample of analysts’ GDP forecasts from 28 countries, we find that economies with stronger levels of investor protection have a lower association between changes in aggregate profit margin and errors in forecasts of GDP growth.

Keywords: GDP growth; Aggregate earnings; Aggregate profit margins; Investor protection; Analyst forecasts of GDP; G15; G17 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s11142-023-09785-6

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