Research Output
The impact of economic freedom on financial analysts' earnings forecast: Evidence from the Asia-Pacific region
  This study investigates the impact of economic freedom (EcF) on analysts’ earnings forecast (AEF) accuracy. EcF is measured from five aspects: Government, Protection, Money, Trade, and Regulation. With the sample of 7,014 firms from 12 economies in the Asia-Pacific region over the 18-year period, this study finds an optimistic bias in AEFs. The optimistic bias is stronger for large firms, value firms, stock with high analyst coverage, and low dispersion in AEFs. Also, the optimistic bias is stronger from analysts in economies with less EcF than in more freedom ones. Analysts are making more accurate earnings forecasts for firms in economies with more EcF. In addition, the study finds the optimism bias reduced the earnings forecast accuracy. These findings may suggest that an increase of EcF would lead to more transparent financial statements, which further reduces the analysts’ forecast bias.

  • Type:

    Article

  • Date:

    07 March 2021

  • Publication Status:

    Published

  • Publisher

    Elsevier BV

  • DOI:

    10.1016/j.frl.2021.102009

  • Cross Ref:

    10.1016/j.frl.2021.102009

  • ISSN:

    1544-6123

  • Funders:

    Edinburgh Napier Funded

Citation

Hou, T. C., & Gao, S. (2021). The impact of economic freedom on financial analysts' earnings forecast: Evidence from the Asia-Pacific region. Finance Research Letters, 43, https://doi.org/10.1016/j.frl.2021.102009

Authors

Keywords

Asia-Pacific economies, Earnings forecast, Economic freedom, Forecast bias

Monthly Views:

Available Documents