The effect of a change in analyst composition on analyst forecast accuracy : Evidence from U.S. 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 the analysts providing forecasts over time. By studying foreign firms cross-listing on U.S. stock exchanges, we find that analyst composition changes by more than 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.