Corporate Governance Reforms and Analyst Forecasts: International Evidence

Simeng Liu, Kun Tracy Wang, Yue Wu*

*Corresponding author for this work

    Research output: Contribution to journalArticlepeer-review

    Abstract

    In this study, we examine the effect of worldwide corporate governance reforms on analyst forecasts using data on firms from 41 countries that have implemented such reforms. Employing a difference-in-differences design, we find robust evidence of a significant positive effect of these reforms, which mainly promote the independence of the audit committee and auditors, on analyst forecast accuracy. We also find significant improvements in post-reform corporate governance structure and the quantity and quality of corporate disclosure, which validates the predicted economic mechanism of the impact of these reforms. Moreover, the reforms are effective in reducing analyst forecast bias and dispersion, suggesting an overall improvement in analyst forecast quality after reform implementation. Furthermore, we find a moderating effect of analyst general experience on the relationship of interest, which is consistent with the conjecture that improved corporate disclosures following reforms could be more beneficial for analysts with less experience. Overall, our findings shed new insights into how country-level corporate governance reforms worldwide shape firms’ information environment.

    Original languageEnglish
    Pages (from-to)272-304
    Number of pages33
    JournalAbacus
    Volume60
    Issue number2
    DOIs
    Publication statusPublished - Jun 2024

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