The Impact of Internet Penetration on Financial Analysts’ Information Environment: A Cross-Country Analysis

• In Event: Disclosure Environment

Abstract

This study examines the impact of country-level Internet adoption rates on the behavior of financial analysts. Using international data from 35 countries over the 2000–2011 period, we find a negative association between countrywide Internet penetration and analysts’ earnings forecast errors/forecast dispersion. This association extends to both a change analysis and a country-year level analysis. Our findings are consistent with the notion that greater Internet adoption at the country level decreases the cost of financial analysts’ private information searches in capital markets, leading to higher-quality earnings forecasts and stronger agreement regarding the firm’s future earnings performance.

Authors

• Tony Kang, University of Nebraska-Lincoln

• Dongyoung Lee, McGill University

• Jianwei Li, University of Nebraska-Lincoln

• Yong Keun Yoo, Korea Univeristy