Does individual investors’ dividend tax influence analyst forecast? Evidence from a quasi-natural experiment in China

Abstract

Taking the implementation of dividend tax reform (DTR) for individual investors as a quasi-natural experiment, this paper analyzes the effect of individual investors’ dividend tax on analyst forecast using difference-in-differences model. The results show a significant decrease in the accuracy of analysts’ forecasts after the implementation of DTR, mainly exacerbating the optimistic bias of analysts. Further analysis indicates that this effect is more pronounced for firms with poorer information quality and firms with less private information. Our study provides theoretical support and empirical evidence for regulators concerned with information asymmetry of capital market and investor protection.