Does a Sudden Breakdown in Public Information Searches Impede Analyst Forecast Accuracy? Evidence from Google’s Withdrawal from China

60 Pages Posted: 18 Feb 2021 Last revised: 21 Feb 2021

See all articles by Yangyang Chen

Yangyang Chen

City University of Hong Kong (CityUHK) - Department of Accountancy

Zihui Li

Renmin University of China

Lijun Ma

University of International Business and Economics (UIBE)

Min Zhang

Renmin University of China - School of Business

Date Written: January 29, 2021

Abstract

We examine whether the sudden loss of public information search capacity caused by Google’s withdrawal from China affects Chinese analysts’ earnings forecasts. We find that in the period after Google’s withdrawal, analyst forecast accuracy declines, particularly for firms with foreign trade. This decline in analyst forecast accuracy suggests that Google’s withdrawal hinders analysts’ acquisition of firms’ foreign information, which decreases the quality of their earnings forecasts. Consistent with this argument, we find that the effect of Google’s withdrawal is stronger for firms with greater business complexity and more opaque financial reporting. We also find that corporate site visits serve as an alternative information source that can compensate for the information loss caused by Google’s withdrawal. Our evidence suggests a potential cost of limiting the flow of public information about firms in the capital market.

Keywords: Google’s withdrawal, public information acquisition, analyst forecast accuracy

JEL Classification: G20, G24, M40

Suggested Citation

Chen, Yangyang and Li, Zihui and Ma, Lijun and Zhang, Min, Does a Sudden Breakdown in Public Information Searches Impede Analyst Forecast Accuracy? Evidence from Google’s Withdrawal from China (January 29, 2021). Available at SSRN: https://ssrn.com/abstract=3775434 or http://dx.doi.org/10.2139/ssrn.3775434

Yangyang Chen (Contact Author)

City University of Hong Kong (CityUHK) - Department of Accountancy ( email )

83 Tat Chee Avenue
Kowloon
Hong Kong
China

Zihui Li

Renmin University of China ( email )

Room B906
Xianjin Building
Beijing, Beijing 100872
China

Lijun Ma

University of International Business and Economics (UIBE) ( email )

10, Huixin Dongjie
Changyang District
Beijing, Beijing 100029
China

Min Zhang

Renmin University of China - School of Business ( email )

Beijing
China

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