Politically Connected Firms, Legal Enforcement, and Analyst Forecast Attributes
Posted: 18 Sep 2006 Last revised: 23 Feb 2014
Date Written: August 24, 2007
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: Suggested Citation