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

B.P.M. Frijns; Alexandre Garel

doi:10.1016/j.econlet.2021.109957

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 journal › Article › Academic › peer-review

2 Citations (Web of Science)

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.

Original language	English
Article number	109957
Number of pages	7
Journal	Economics Letters
Volume	205
DOIs	https://doi.org/10.1016/j.econlet.2021.109957
Publication status	Published - Aug 2021

Keywords

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

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10.1016/j.econlet.2021.109957Licence: CC BY

Cite this

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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.",

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AB - 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.

KW - ABILITY

KW - BIAS

KW - CEOs

KW - Cultural distance

KW - Cultural heritage

KW - DIVERSITY

KW - EXPERTISE

KW - Equity analysts

KW - Forecast accuracy

KW - NATIONAL CULTURE

KW - TRANSLATION

KW - VALUES

U2 - 10.1016/j.econlet.2021.109957

DO - 10.1016/j.econlet.2021.109957

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VL - 205

JO - Economics Letters

JF - Economics Letters

M1 - 109957

ER -

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

Abstract

Keywords

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