TY - JOUR
T1 - Product market competition and analyst forecasting activity
T2 - International evidence
AU - Haw, In Mu
AU - HU, Bingbing
AU - Lee, Jay Junghun
N1 - Funding Information:
We thank Woo-Jong Lee, Gordon Richardson, Byungcherl Charlie Sohn, Donghui Wu, Michael Stich (discussant) and conference participants at the 2012 American Accounting Association Annual Meeting, and the 2013 European Accounting Association Annual Conference for their comments. We acknowledge the financial support by a grant (RGC241609) from the Research Grants Council of the Hong Kong Special Administrative Region, China.
PY - 2015/7/1
Y1 - 2015/7/1
N2 - In this study, we investigate how product market competition affects the extent of analyst following and the properties of analyst forecasts. Using a broad sample of firms from 37 countries over the 1990-2008 period, we find that firms that operate in more concentrated industries and with stronger pricing power are associated with greater analyst following, higher forecast accuracy, and lower forecast dispersion. Moreover, the effect of product market power on analyst following and forecast properties is more pronounced in countries with less effective competition laws and higher entry costs. These findings suggest that high industry concentration and a dominant market position enhance the earnings predictability of firms and lower their information uncertainty, and that country-level institutions that promote competition effectively constrain the power in product markets.
AB - In this study, we investigate how product market competition affects the extent of analyst following and the properties of analyst forecasts. Using a broad sample of firms from 37 countries over the 1990-2008 period, we find that firms that operate in more concentrated industries and with stronger pricing power are associated with greater analyst following, higher forecast accuracy, and lower forecast dispersion. Moreover, the effect of product market power on analyst following and forecast properties is more pronounced in countries with less effective competition laws and higher entry costs. These findings suggest that high industry concentration and a dominant market position enhance the earnings predictability of firms and lower their information uncertainty, and that country-level institutions that promote competition effectively constrain the power in product markets.
KW - Analyst following
KW - Competition laws
KW - Forecast accuracy
KW - Forecast dispersion
KW - Product market competition
UR - http://www.scopus.com/inward/record.url?scp=84928252372&partnerID=8YFLogxK
U2 - 10.1016/j.jbankfin.2015.02.010
DO - 10.1016/j.jbankfin.2015.02.010
M3 - Article
AN - SCOPUS:84928252372
SN - 0378-4266
VL - 56
SP - 48
EP - 60
JO - Journal of Banking and Finance
JF - Journal of Banking and Finance
ER -