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Cross-border regulatory cooperation and analyst forecasts

Author

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  • Tsang, Albert
  • Xiang, Yi
  • Yu, Li

Abstract

Using the staggered entry of foreign countries into the Multilateral Memorandum of Understanding (MMoU) as a shock to the cross-border regulatory cooperation and information exchange, we find that foreign firms cross-listed in the U.S. show a greater level of analyst following and a significant reduction in analyst forecast error and dispersion after their foreign home countries join the MMoU. Furthermore, the effect of the MMoU on analysts tends to be stronger for cross-listed firms with a greater level of information opacity and for analysts with greater difficulty forecasting cross-listed firms. To examine the potential channel, we find an increase in information/financial statement comparability after the entry of the MMoU by a firm's foreign home country. Collectively, our findings suggest that strengthened cross-border regulatory cooperation has a significant effect on reducing analyst information processing costs.

Suggested Citation

  • Tsang, Albert & Xiang, Yi & Yu, Li, 2023. "Cross-border regulatory cooperation and analyst forecasts," International Review of Financial Analysis, Elsevier, vol. 90(C).
    • Handle: RePEc:eee:finana:v:90:y:2023:i:c:s1057521923003605
    DOI: 10.1016/j.irfa.2023.102844
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