The Effect of Media Competition on Analyst Forecast Properties: Cross-Country Evidence
54 Pages Posted: 8 Sep 2014 Last revised: 19 Mar 2015
Date Written: August 1, 2014
This study examines the effect of media competition on analyst forecast properties in an international setting. Using data from 113,436 firm-year observations from 32 countries spanning 2000 through 2012, we find that firms in countries with stronger media competition enjoy more accurate, less optimistically biased, and less dispersed analyst forecasts. In addition, we find that the effects of media competition on the properties of analyst forecasts are stronger for firms with lower institutional ownership, for firms followed by fewer analysts or by analysts from smaller brokerage houses, and for firms with weaker financial performance. This suggests that media competition plays a more pronounced role in shaping the information environment when information from non-media channels is likely to be limited or of lower quality. Finally, we find that analysts in countries with stronger media competition tend to follow more firms, suggesting that stronger media competition reduces analysts’ information acquisition costs, which in turn, improves the properties of their forecasts.
Keywords: media competition, international analyst forecasts, analyst forecast accuracy, analyst forecast optimism, analyst forecast dispersion, information environment
JEL Classification: M4, M41
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