Analysts’ reactions to political uncertainty
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We investigate how presidential election-related uncertainty affects firms’ earnings reporting using the earnings forecasts of analysts serving as market information intermediaries. As uncertainty in the business environment increases around elections, analysts may experience greater difficulty in predicting earnings. During an election, firms may reduce their own information because they do not know how the business environment will change according to the result of an election and there is uncertainty about market information as well, is uncertain. As market information is also uncertain, analysts have little information to use when forecasting. We find that analysts’ forecast accuracy decreases and that analysts forecast more optimistically during presidential elections, periods of political uncertainty. Overall, our results indicate that uncertainty during elections influence analysts’ forecasts.
Abstract
We investigate how presidential election-related uncertainty affects firms’ earnings reporting using the earnings forecasts of analysts serving as market information intermediaries. As uncertainty in the business environment increases around elections, analysts may experience greater difficulty in predicting earnings. During an election, firms may reduce their own information because they do not know how the business environment will change according to the result of an election and there is uncertainty about market information as well, is uncertain. As market information is also uncertain, analysts have little information to use when forecasting. We find that analysts’ forecast accuracy decreases and that analysts forecast more optimistically during presidential elections, periods of political uncertainty. Overall, our results indicate that uncertainty during elections influence analysts’ forecasts.
참고문헌 (24)
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