Product market competition, investor protection and analysts’ earnings forecasts

Purpose: This study aims to examine the effects of product market competition (PMC) on analysts’ earnings forecast attributes, particularly forecast accuracy and dispersion. The authors also investigate whether investor protection moderates the relationship between PMC and forecast attributes. Desig...

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Published in:Journal of Financial Reporting and Accounting
Main Author: Kamarudin K.A.; Wan Ismail W.A.; Chapple L.; Truong T.P.
Format: Article
Language:English
Published: Emerald Publishing 2023
Online Access:https://www.scopus.com/inward/record.uri?eid=2-s2.0-85180234109&doi=10.1108%2fJFRA-04-2023-0184&partnerID=40&md5=357c4d89e4c108e74f6e614373744cea
id 2-s2.0-85180234109
spelling 2-s2.0-85180234109
Kamarudin K.A.; Wan Ismail W.A.; Chapple L.; Truong T.P.
Product market competition, investor protection and analysts’ earnings forecasts
2023
Journal of Financial Reporting and Accounting


10.1108/JFRA-04-2023-0184
https://www.scopus.com/inward/record.uri?eid=2-s2.0-85180234109&doi=10.1108%2fJFRA-04-2023-0184&partnerID=40&md5=357c4d89e4c108e74f6e614373744cea
Purpose: This study aims to examine the effects of product market competition (PMC) on analysts’ earnings forecast attributes, particularly forecast accuracy and dispersion. The authors also investigate whether investor protection moderates the relationship between PMC and forecast attributes. Design/methodology/approach: The sample covers 49,578 firm-year observations from 38 countries. This study uses an ordinary least squares regression, a Heckman two-stage regression and an instrumental two-stage least squares regression. Findings: This study finds that PMC is associated with higher forecast accuracy and lower dispersion. The results also show that investor protection enhances the effect of PMC on forecast accuracy and dispersion. These findings imply that countries with strong investor protection have a better information environment, as exhibited by the stronger relationship between PMC and analysts’ forecast properties. Practical implications: The findings highlight the importance of strong governance mechanisms in both the country and industry environments. Policymakers, including government agencies and financial regulators, can leverage these insights to formulate regulations that promote competition, ensure investor protection and facilitate informed investment decisions. Originality/value: This study advances our understanding of how PMC affects analysts’ earnings forecast attributes. In addition, it pioneers evidence of the moderating role of investor protection in the relationship between PMC and forecast attributes. © 2023, Emerald Publishing Limited.
Emerald Publishing
19852517
English
Article

author Kamarudin K.A.; Wan Ismail W.A.; Chapple L.; Truong T.P.
spellingShingle Kamarudin K.A.; Wan Ismail W.A.; Chapple L.; Truong T.P.
Product market competition, investor protection and analysts’ earnings forecasts
author_facet Kamarudin K.A.; Wan Ismail W.A.; Chapple L.; Truong T.P.
author_sort Kamarudin K.A.; Wan Ismail W.A.; Chapple L.; Truong T.P.
title Product market competition, investor protection and analysts’ earnings forecasts
title_short Product market competition, investor protection and analysts’ earnings forecasts
title_full Product market competition, investor protection and analysts’ earnings forecasts
title_fullStr Product market competition, investor protection and analysts’ earnings forecasts
title_full_unstemmed Product market competition, investor protection and analysts’ earnings forecasts
title_sort Product market competition, investor protection and analysts’ earnings forecasts
publishDate 2023
container_title Journal of Financial Reporting and Accounting
container_volume
container_issue
doi_str_mv 10.1108/JFRA-04-2023-0184
url https://www.scopus.com/inward/record.uri?eid=2-s2.0-85180234109&doi=10.1108%2fJFRA-04-2023-0184&partnerID=40&md5=357c4d89e4c108e74f6e614373744cea
description Purpose: This study aims to examine the effects of product market competition (PMC) on analysts’ earnings forecast attributes, particularly forecast accuracy and dispersion. The authors also investigate whether investor protection moderates the relationship between PMC and forecast attributes. Design/methodology/approach: The sample covers 49,578 firm-year observations from 38 countries. This study uses an ordinary least squares regression, a Heckman two-stage regression and an instrumental two-stage least squares regression. Findings: This study finds that PMC is associated with higher forecast accuracy and lower dispersion. The results also show that investor protection enhances the effect of PMC on forecast accuracy and dispersion. These findings imply that countries with strong investor protection have a better information environment, as exhibited by the stronger relationship between PMC and analysts’ forecast properties. Practical implications: The findings highlight the importance of strong governance mechanisms in both the country and industry environments. Policymakers, including government agencies and financial regulators, can leverage these insights to formulate regulations that promote competition, ensure investor protection and facilitate informed investment decisions. Originality/value: This study advances our understanding of how PMC affects analysts’ earnings forecast attributes. In addition, it pioneers evidence of the moderating role of investor protection in the relationship between PMC and forecast attributes. © 2023, Emerald Publishing Limited.
publisher Emerald Publishing
issn 19852517
language English
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