Product market competition and analyst forecasting activity: International evidence

In Mu Haw, Bingbing HU*, Jay Junghun Lee

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

23 Citations (Scopus)

Abstract

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.

Original languageEnglish
Pages (from-to)48-60
Number of pages13
JournalJournal of Banking and Finance
Volume56
DOIs
Publication statusPublished - 1 Jul 2015

Scopus Subject Areas

  • Finance
  • Economics and Econometrics

User-Defined Keywords

  • Analyst following
  • Competition laws
  • Forecast accuracy
  • Forecast dispersion
  • Product market competition

Fingerprint

Dive into the research topics of 'Product market competition and analyst forecasting activity: International evidence'. Together they form a unique fingerprint.

Cite this