Does Foreign Experience Matter for Analysts’ Forecasting Performance?

Abstract

We study the impact of analysts’ foreign experience on their forecasting performance in emerging markets. Using a comprehensive hand-collected data set from China, we show that analysts with foreign experience tend to issue more accurate earnings forecasts. We exploit staggered implementation of provincial policies aimed at encouraging graduates of foreign universities to return to China to establish causality. Exploration of the mechanisms behind the documented relation points to foreign knowledge acquisition, greater independence, and advanced skills in gathering and analyzing information as the channels through which foreign experience enhances analyst forecast accuracy. In supplemental analyses, we show that analysts with foreign experience tend to issue more informative recommendations and have better career prospects.