The effect of cultural distance between an analyst and a CEO on analysts’ earnings forecast performance

B.P.M. Frijns*, Alexandre Garel

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

Abstract

We examine how cultural distance between an analyst and a CEO is associated with earnings forecast performance. Using a sample of 283,062 analyst-firm-year earnings forecasts over the period 1992-2016, we find that greater cultural distance is associated with greater forecast error. This finding is robust to the use of alternative culture frameworks. We further document that our result is mainly driven by a culture effect rather than bilateral trust or a shared common language. (C) 2021 The Author(s). Published by Elsevier B.V.

Original languageEnglish
Article number109957
Number of pages7
JournalEconomics Letters
Volume205
DOIs
Publication statusPublished - Aug 2021

Keywords

  • Equity analysts
  • CEOs
  • Cultural heritage
  • Cultural distance
  • Forecast accuracy
  • EXPERTISE
  • BIAS
  • ABILITY
  • DIVERSITY
  • VALUES
  • NATIONAL CULTURE
  • TRANSLATION

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