동아시아경상학회지 (East Asian Journal of Business Economics (EAJBE))

동아시아경상학회 (East Asia Business Economics Association)
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Foreign Income Growth and Analyst Forecast Optimism

  • Cho, Hyejin (Department of Business Administration, Korea University) ;
  • Ahn, He-Soung (Department of Business Administration, Sejong University)
  • 투고 : 2019.02.13
  • 심사 : 2019.03.19
  • 발행 : 2019.03.30
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초록

Purpose - The international market provides a growth momentum for firms by allowing them to tap into a new market. Given information asymmetry between firms and financial analysts, firms' international growth can be perceived as a higher business prospect by analysts. This paper explores the possibility of analysts' over-emphasis on foreign income growth in predicting earnings. Research design, data, and methodology - We utilize a sample of U.S. firms to test the relationship between foreign income growth and analysts' forecast optimism. Our sample of publicly listed and traded U.S. firms between 1976 and 2016 consists of 6,120 firm-year observations. Results - Empirical analyses show that firms that show higher international growth in earnings are likely to face forecast inaccuracy by financial analysts. From the perspective of firms, their earnings are less than what analysts forecasted. Contrary to our prediction on the moderating effect of innovative capabilities, optimistic bias is not intensified - rather, it is reduced - when firms have higher innovative capabilities. Conclusions - Our results imply that while analysts favor firms with higher international growth, innovative capability on the international market places additional risks to firms' operation.

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참고문헌

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