The Impact of Analysts' Forecast Behavior on Companies

Abstract

As an important information intermediary between public companies and investors, analysts are gaining an increasingly significant position in the capital market. They make use of their expertise and professional skills to interpret and analyze market information, and lead investors to make decisions by writing research reports. Hence, it is vitally essential for analysts to forecast relevant events or market participants’ behaviors correctly and accurately in the investment process of the market. Excessive deviation from the forecasts may damage the interests of investors and contribute to a bubble in the capital market. This paper focuses on the factors affecting analysts' forecast accuracy, such as analysts' valuation model selection preferences, systematic optimism bias, information disclosure quality, etc. By systematically combing the remarkable literature on analysts' forecasting behaviors and influences, this paper summarizes the impacts of both analysts' forecasting behaviors and the prediction accuracy on firms' share prices, investments and innovations, as well as puts forward suggestions for analysts themselves and for regulatory.