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US Analyst Regulation and the Earnings Forecast Bias around the World


  • We would like to thank John Doukas (the editor of this issue) and an anonymous referee for valuable suggestions. We also thank Donal Byard, Terrence Martell, Oghenovo Obrimah, Joseph Weintrop, and seminar participants at Baruch College for helpful comments.


We examine the spillover effects of the Global Analyst Research Settlement (or Global Settlement) on analysts’ earnings forecasts in 40 developed and emerging markets. Prior to the Global Settlement, analysts generally made overly optimistic forecasts, this bias tending to be higher in countries with less investor protection. This forecast bias declined significantly after passage of the Global Settlement, the spillover effect being stronger for countries with lower investor protection. The spillover effect is also stronger for countries with a more significant presence of the analysts of the 12 banks directly involved in the Global Settlement.