Bilinski, Pawel and Lyssimachou, Danielle and Walker, Martin (2012) Target price accuracy : international evidence. Working Paper. Lancaster University, Lancaster.
Abstract
This paper shows that analysts exhibit differential and persistent ability to issue accurate target prices (TPs) and that institutional and regulatory differences across countries affect TP accuracy. Using a sample of 16 countries, we find that better past TP forecasters, analysts with higher forecasting experience, following more firms, country-specialized, and employed by a large broker issue more accurate TPs. With respect to the country’s institutional and regulatory setting, we find that factors such as the quality of financial reporting, the enforcement of accounting standards, and ownership concentration explain cross-country differences in TP forecast accuracy. Also, we show that the mandatory adoption of the International Financial Reporting Standards has improved TP accuracy.