Shareholder Protection And Forecast Bias

Abstract

This research explores whether shareholder protection influences analyst optimism and forecast accuracy in a global setting. The first set of empirical results suggests that, as commonly observed in the existing domestic literature, analyst optimism characterizes analysts’ forecasts in the 19 sample countries. Further empirical results provide evidence that analyst forecasts issued in countries with strong shareholder protection laws are less optimistic and more accurate than analyst forecasts published in countries with weak protection laws. It is also observed that analyst forecast is superior to a naïve model of no change in earnings. (JEL: G15, G18)