The Effects of Foreign Equity Ownership on Earnings Forecasts in China

In this article, the accuracy of analysts' earnings forecasts in China is studied. Chinese-listed firms with foreign ownership need to report their financial statements in accordance with both Chinese and international accounting standards. This reporting environment offers a good testing ground for the hypothesis that forecasting error is an inverse function of the availability of relevant information. Empirical evidence indicates that firms with foreign ownership tend to have lower forecasting errors. This result demonstrates the value and positive influence of foreign investment in China.