Abstract
The main objective of this chapter is to analyze the performance of financial analysts before and after cross-border mergers and acquisitions. We propose to focus on the evolution of financial analysts’ forecast (hereafter FAF) accuracy and FAF bias. We compare the pre-merger and post-merger forecast accuracy of consensus analysts’ forecasts two years after the merger on the Canadian stock market for the 1990–2004 period.
The authors thank Thomson Financial for providing the I/B/E/S database and Securities Data Corporation (SDC) Worldwide M&A database. We remain responsible for any errors.
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Preview
Unable to display preview. Download preview PDF.
References
Alford, A. W. and Berger, P. G. (1999) “A Simultaneous Equations Analysis of Forecasts Accuracy, Analysts Following, and Trading Volume”, Journal of Accounting, Auditing & Finance, 14: 219–46.
Ang, J. S. and Ciccone, S. J. (2001) “International Differences in Analyst Forecast Properties”, Working paper, Florida State University and University of New Hampshire.
Black, E. L. and Carnes, T. A. (2002) “Analysts’ Forecasts in Asian Markets: How Does the Accounting System Affect Accuracy?” Journal of International Financial Management and Accounting, 17 (3): 208–27.
Brown, L. (1997) “Analysts Forecasts Errors: Additional Evidence”, Financial Analysts Journal, 53: 81–8.
Brown, L., Richardson, G. and Schwager, S. (1987) “An Information Interpretation of Financial Analyst Superiority in Forecasting Earnings”, Journal of Accounting Research, 25: 49–67.
Canina, L. and Sinha, P. (2002) “The Impact of Mergers and Acquisitions on Earnings Predictability: An Examination of the Lodging Industry”, Working paper, Cornell University, New York, USA.
Chang, J. J., Khanna, T. and Palepu, K. G. (2000) “Analyst Activity Around the World”, Working paper, The Wharton School and Harvard Business School, Cambridge, Mass., USA.
Chopra, V. K. (1998) “Why So Much Error in Analysts’ Earnings Forecasts?”, Financial Analysts Journal, 54: 35–42.
Ciccone, S. J., (2005) “Improvement in Forecasting Ability of Analysts”, International Review of Financial Analysis, 14: 1–22.
Dowen, R. J. (1996) “Analyst Reaction to Negative Earnings for Large Well–Known Firms”, The Journal of Portfolio Management, 21: 49–55.
Dunn, K. and Nathan, S. (1998) “The Effect of Industry Diversification on Consensus and Individual Analysts’ Earnings Forecasts”, Working paper, Baruch College and Georgia State University.
Erwin, G. R. and Perry, S. E. (2000) “The Effect of Foreign Diversification on Analysts’ Prediction Errors”, International Review of Financial Analysis, 9: 121–45.
Haw, I., Jung, K. and Ruland, W. (1994) “The Accuracy of Financial Analysts’ Forecasts After Mergers”, Journal of Accounting, Auditing and Finance, 9 (2): 465–83.
Heath, C. and Tversky, D. (1991) “Preference and Belief: Ambiguity and Competence in Choice under Uncertainty”, Journal of Risk and Uncertainty, 4 (1): 5–28.
Hope, 0.–K. (2003) “Disclosure Practices, Enforcement of Accounting Standards and Analysts’ Forecast Accuracy: An International Study”, Journal of Accounting Research, 41: 235–78.
Loree, D, Chen, C. C. and Guisinger, S. (2000) “International Acquisitions: Do Financial Analysts Take Note?”, Journal of World Business, 35: 300–13.
Malloy, C. J. (2005) “The Geography of Equity Analysis”, Journal of Finance, 60: 719–55.
Mikhail, M. B., Walther, B. R. and Willis, R. H. (1997) “Do Security Analysts Improve their Performance with Experience?”, Journal of Accounting Research, 35: 131–66.
Richardson, S., Teoh, S. H. and Wysocki, P. (1999) “Tracking Analysts’ Forecasts over The Annual Earnings Horizon: Are Analysts’ Forecasts Optimistic or Pessimistic?”, Working paper, University of Michigan Business School.
Solnik, B. H. (1996), International Investments ( Reading, Mass.: Addison–Wesley).
Editor information
Editors and Affiliations
Copyright information
© 2007 Alain Coën Aurélie Desfleurs Claude Francoeur
About this chapter
Cite this chapter
Coën, A., Desfleurs, A., Francoeur, C. (2007). The Impact of Cross-Border Mergers and Acquisitions on Financial Analysts’ Forecasts: Evidence from the Canadian Stock Market. In: Gregoriou, G.N., Neuhauser, K.L. (eds) Mergers and Acquisitions. Finance and Capital Markets Series. Palgrave Macmillan, London. https://doi.org/10.1057/9780230589681_9
Download citation
DOI: https://doi.org/10.1057/9780230589681_9
Publisher Name: Palgrave Macmillan, London
Print ISBN: 978-1-349-36362-9
Online ISBN: 978-0-230-58968-1
eBook Packages: Palgrave Economics & Finance CollectionEconomics and Finance (R0)