The Effects of Corporate Governance and Product Market Competition on Analysts’ Forecasts: Evidence from the Brazilian Capital Market
The International Journal of Accounting Symposium 2014, Forthcoming
37 Pages Posted: 31 May 2015
Date Written: June 24, 2014
We investigate how the interaction between product market competition and firm-level corporate governance enhances the accuracy of analysts’ forecasts and reduces the forecasts’ deviation. Using a sample of Brazilian public firms covered by analysts, we find that competitive industries provide incentives to increase the flow of information but not necessarily to enhance its quality. However, strong corporate governance enhances the financial reporting process and consequently the quality of analysts’ forecasts. Our main evidence is that the analysts who cover firms in higher competitive industries with strong corporate governance are the most accurate.
Keywords: product market competition, corporate governance, accuracy of analysts’ forecasts
JEL Classification: D40, D82, D84, G29, G14, G34, G30, M41
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