Investor Protection, Aggregate Changes in Profit Margins and Forecasts of Growth in GDP: International Evidence

50 Pages Posted: 18 Aug 2020 Last revised: 17 Apr 2023

See all articles by Neil L. Fargher

Neil L. Fargher

Australian National University (ANU)

Lijuan Zhang

Australian National University

Date Written: April 16, 2023

Abstract

This study draws on the investor protection literature to examine whether differences in a country’s level of investor protections help explain cross-country variation in the extent to which macroeconomic forecasters take account of aggregate changes in corporate profit margins when forecasting future growth in GDP. We find that economies with stronger levels of investor protection have a higher association between changes in aggregate profit margin and GDP growth. Using a unique sample of analysts’ GDP forecasts from 28 countries, we find that economies with stronger levels of investor protection have a lower association between changes in aggregate profit margin and errors in forecasts of GDP growth.

Keywords: aggregate profit margin, GDP growth, investor protection, analyst forecasts of GDP

JEL Classification: G15, G17

Suggested Citation

Fargher, Neil L. and Zhang, Lijuan, Investor Protection, Aggregate Changes in Profit Margins and Forecasts of Growth in GDP: International Evidence (April 16, 2023). Available at SSRN: https://ssrn.com/abstract=3652949 or http://dx.doi.org/10.2139/ssrn.3652949

Neil L. Fargher (Contact Author)

Australian National University (ANU) ( email )

Canberra, Australian Capital Territory 2601
Australia

Lijuan Zhang

Australian National University ( email )

Canberra, Australian Capital Territory 2601
Australia

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