Politically Connected Firms, Legal Enforcement, and Analyst Forecast Attributes

Posted: 18 Sep 2006 Last revised: 23 Feb 2014

See all articles by Charles J.P. Chen

Charles J.P. Chen

City University of Hong Kong (CityUHK) - Department of Accountancy

Yuan Ding

China Europe International Business School (CEIBS)

Chansog (Francis) Kim

The State University of New York at Stony Brook

Date Written: August 24, 2007

Abstract

We study the association between a firm's political connection and the earnings forecasts of analysts in an international context. We find that analysts experience more difficulties in predicting the earnings of firms with political connection than they do those of firms without it. However, in those jurisdictions that have effective law enforcement, earnings forecasts are less influenced by a firm's political connections. Our findings contribute to the literature by identifying political connection as an additional dimension of forecasting difficulty. The effect of political connection on the forecasts of financial analysts can be mitigated only in Jurisdictions with effective legal enforcement.

Keywords: analysts' earnings forecasts, political connection, legal enforcement

JEL Classification: M41, M47, G29, G38, K22

Suggested Citation

Chen, Charles Jieping and Ding, Yuan and Kim, Chansog (Francis), Politically Connected Firms, Legal Enforcement, and Analyst Forecast Attributes (August 24, 2007). Available at SSRN: https://ssrn.com/abstract=930618 or http://dx.doi.org/10.2139/ssrn.930618

Charles Jieping Chen

City University of Hong Kong (CityUHK) - Department of Accountancy ( email )

83 Tat Chee Avenue
Kowloon
Hong Kong
China
+852 2788-7909 (Phone)
+852 2788-7944 (Fax)

Yuan Ding

China Europe International Business School (CEIBS) ( email )

699, Hongfeng Road
Shanghai 201206, Shanghai 201206
China

Chansog (Francis) Kim (Contact Author)

The State University of New York at Stony Brook ( email )

College of Business
Stony Brook, NY 11794
United States
5163040037 (Phone)
631-632-9412 (Fax)

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