Effects of Analysts’ Country Familiarity on Forecast Behavior : Evidence from Chinese Cross-Listed Firms in the United States

This study provides empirical evidence regarding the effect of analysts' country familiarity on their forecast behavior. Prior research has generally agreed that local analysts outperform their nonlocal counterparts due to information advantage or local familiarity. However, the effect of country familiarity on analysts' earnings forecast abilities for foreign firms cross-listed in the United States is unclear. Using a handcollected sample of Chinese cross-listed firms, I examine whether analysts who are familiar with these Chinese firms are associated with better performance in forecast accuracy, forecast dispersion, and information precision. Results indicate that country familiarity has a positive effect on analysts' earnings forecasts. Specifically, analysts who are familiar with Chinese cross-listed firms have higher accuracy and lower dispersion. Additional analysis suggests that the superior performance can be attributed to analysts' private information precision rather than public information precision