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The impact of economic freedom on financial analysts' earnings forecast: Evidence from the Asia-Pacific region

Hou, Tony Chieh-Tse; Gao, Simon


Tony Chieh-Tse Hou


This study investigates the impact of economic freedom (EcF) on analysts’ earnings forecast (AEF) accuracy. EcF is measured from five aspects: Government, Protection, Money, Trade, and Regulation. With the sample of 7,014 firms from 12 economies in the Asia-Pacific region over the 18-year period, this study finds an optimistic bias in AEFs. The optimistic bias is stronger for large firms, value firms, stock with high analyst coverage, and low dispersion in AEFs. Also, the optimistic bias is stronger from analysts in economies with less EcF than in more freedom ones. Analysts are making more accurate earnings forecasts for firms in economies with more EcF. In addition, the study finds the optimism bias reduced the earnings forecast accuracy. These findings may suggest that an increase of EcF would lead to more transparent financial statements, which further reduces the analysts’ forecast bias.

Journal Article Type Article
Acceptance Date Mar 3, 2021
Online Publication Date Mar 7, 2021
Publication Date 2021-11
Deposit Date Dec 2, 2021
Publicly Available Date Mar 8, 2022
Journal Finance Research Letters
Print ISSN 1544-6123
Publisher Elsevier
Peer Reviewed Peer Reviewed
Volume 43
Article Number 102009
Keywords Asia-Pacific economies, Earnings forecast, Economic freedom, Forecast bias
Public URL


The Impact Of Economic Freedom On Financial Analysts' Earnings Forecast: Evidence From The Asia-Pacific Region (accepted version) (853 Kb)


Copyright Statement
Accepted version licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International (CC BY-NC-ND 4.0) license.

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