Does Corporate Internationalization Affect Analysts’ Earnings Forecast Bias? Evidence from China

Using manually collected firm-level data on foreign subsidiaries, we examine the impact of internationalisation on analysts’ earnings forecast bias in Chinese multinational corporations. We find that analysts’ earnings forecast bias is stronger among multi-national firms when compared with domestic firms and the higher the level of internationalisation, the greater the bias in analysts’ earnings forecasts. Various methods, such as the Heckman two-stage least squares, propensity score matching, and difference in difference tests, are employed to ensure the robustness of our results. The mechanism analysis indicates that organisational complexity, institutional quality, corporate governance, investment in tax havens, and analysts’ competence are critical factors that moderate the relationship between international diversification and forecast bias. These findings have important implications for multinational corporations, analysts, and investors