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Investor protection and analysts’ cash flow forecasts around the world

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  • Mark L. DeFond

    (University of Southern California)

  • Mingyi Hung

    (University of Southern California)

Abstract

We find that analysts are more likely to provide cash flow forecasts in countries with weak investor protection. This finding is consistent with our hypothesis that market participants demand (and analysts supply) cash flow information when weak investor protection results in earnings that are less likely to reflect underlying economic performance. Our results suggest that information intermediaries respond to market-based incentives to attenuate the adverse effects of country-level institutional factors on earnings’ usefulness. These findings contribute to the literature by shedding light on the institutional determinants of analysts’ research activities, and on the nature of the financial information they generate.

Suggested Citation

  • Mark L. DeFond & Mingyi Hung, 2007. "Investor protection and analysts’ cash flow forecasts around the world," Review of Accounting Studies, Springer, vol. 12(2), pages 377-419, September.
    • Handle: RePEc:spr:reaccs:v:12:y:2007:i:2:d:10.1007_s11142-007-9030-7
    DOI: 10.1007/s11142-007-9030-7
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