Analyst Earnings Forecast Precision and Local Advantage: Evidence from American Depositary Receipt Firms

30 Pages Posted: 10 Apr 2019

See all articles by Fernando Comiran

Fernando Comiran

University of San Francisco - School of Management

Subprasiri Siriviriyakul

University of Connecticut - School of Business

Date Written: April 2019

Abstract

Prior research has documented a finding that local analysts provide more accurate earnings forecasts than nonlocal analysts in many settings. However, little is known about local and nonlocal analysts’ relative earnings forecast abilities for ADR stocks. In this study, we find that the local advantage disappears for ADR stocks and that nonlocal analysts in fact outperform local ones in this case. We investigate the source of this ‘local disadvantage’ and find evidence against hypotheses based on accounting standards and exchange rates. We document that the local advantage decreases with increased investor interest in foreign firms, consistent with our nonlocal investors’ interest hypothesis.

Keywords: Analyst earnings forecasts, Home bias, Local analyst advantage

Suggested Citation

Comiran, Fernando and Siriviriyakul, Subprasiri, Analyst Earnings Forecast Precision and Local Advantage: Evidence from American Depositary Receipt Firms (April 2019). Accounting & Finance, Vol. 59, pp. 481-510, 2019, Available at SSRN: https://ssrn.com/abstract=3369145 or http://dx.doi.org/10.1111/acfi.12311

Fernando Comiran (Contact Author)

University of San Francisco - School of Management ( email )

San Francisco, CA 94117
United States

Subprasiri Siriviriyakul

University of Connecticut - School of Business ( email )

1 University Pl.
Stamford, CT 06901
United States

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