The Effect of a Change in Analyst Composition on Analyst Forecast Accuracy : Evidence from US Cross-Listings

Prior research has shown improvements in analysts' forecast accuracy around various events (e.g. new disclosure regulations or cross-listings), but these studies do not consider a change in the composition and ability of analysts providing forecasts over time. By studying foreign firms cross-listing on U.S. stock exchanges, we find that analyst composition changes by over 50 percent during the three-year period around cross-listing. We show that cross-listing is associated with a shift away from analysts who are less accurate forecasters and toward analysts who are more accurate forecasters. This shift in analyst composition accounts for a significant improvement of 9.5 percent in analyst forecast accuracy. In addition, we document that changes in both analyst ability and public information disclosure affect analyst forecast accuracy around cross-listing. Our results indicate that researchers should control for changes in analyst composition and ability when measuring the impact of specific events on analyst forecast accuracy