By examining how common audit firms in brokerage firms and listed companies influence the brokerages' analyst forecasting behavior, this paper investigates whether analyst forecasting information may derive from audit firms. It comes to the following conclusions: firstly, the analyst is more likely to follow listed companies having a common audit firm with his brokerage firm, and his earnings forecast is more accurate and he is more likely to issue cash flow forecast additionally for this firm; secondly, if the audit firms of the brokerage firm and the listed company change from the different to the same, it will improve forecast accuracy of the analysts in that brokerage for that listed company and vice versa; thirdly, the promotion role of common audit firms in brokerage firms and listed companies in forecast accuracy focuses on companies with less analyst follow and greater income changes and forecast issued by non-star analysts. It helps to understand the effect of common audit firms in brokerage firms and listed companies on analyst forecasting behavior, also helps investors in capital market to make better use of forecast reports issued by analysts in the brokerage firms which have common audit firms with listed companies, and extends information source research of analysts forecast.
A New Discovery for Analyst Forecasting Information Sources: Audit Firms
Journal of Finance and Economics Vol. 42, Issue 05, pp. 76 - 88 (2016) DOI:10.16538/j.cnki.jfe.2017.05.006
Cite this article
Liu Wenjun, Xie Bangsheng. A New Discovery for Analyst Forecasting Information Sources: Audit Firms[J]. Journal of Finance and Economics, 2016, 42(5): 76–88.
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