Vertical institutional ownership and analyst forecast bias: Evidence from industry chain equity linkages

As the impact of increasingly complex upstream and downstream relationships on analyst forecasts continues to intensify, the effect of institutional investors' equity extension along the industry chain on analyst forecast bias has become a critical issue. This paper explores the influence of vertical institutional ownership (VIO) on analyst forecast bias within the industry chain. The findings indicate that VIO significantly reduces analyst forecast bias, demonstrating its positive role in optimizing the capital market information environment. Mechanism tests reveal that VIO enhances corporate information transparency, mitigates business risks, and alleviates supply and demand mismatches along the industry chain. These effects reduce the complexity and cost of analyst forecasts, thereby constraining forecast bias. Based on heterogeneity analysis, we find that the inhibitory effect of VIO on analyst forecast bias is more evident for companies with weaker profitability, higher business complexity, lower analyst competence, and those located in regions where the industry chain leader policy has not been implemented. Furthermore, an analysis of vertical institutional characteristics suggests that the inhibitory impact of VIO on analyst forecast bias is greater when institutional equity extends downstream along the industry chain, demonstrates greater resilience to stress, and involves ownership entry. These findings not only enrich the existing research related to institutional co-ownership and analyst forecast bias but also offer practical insights and policy recommendations for leveraging VIO's governance effects to enhance the capital market information environment.