Title

Local Analyst Earnings Forecast Advantages in Europe

Publication Type

Conference Paper

Publication Date

2004

Abstract

Local analysts may be in an advantageous earnings forecast position relative to non-local analysts due to information asymmetries, different incentives or lower information search costs. Alternatively, local managers may manage earnings towards local analyst earnings forecasts. Supporting these conjectures, I find that local analysts issue more accurate, timelier earnings forecasts than non-local analysts. Germany and the Netherlands offer the strongest evidence. Evidence is inconclusive in Belgium and Switzerland. In no country is there evidence of non-local analyst forecasting advantages. U.K. (London) based analysts are less accurate forecasters than competing analysts. The magnitude of the local forecast advantage is large enough to be economically intersesting. These findings are indicative of geographic information asymmetries and support explanations for equity home bias.

Keywords

Analyst, Earnings Forecast

Discipline

Accounting

Research Areas

Financial Performance Analysis

Publication

American Accounting Association International Accounting Section Mid-Year Meeting 2004