Firm geographic dispersion and financial analysts’ forecasts

Platikanova, Petya; Mattei, Marco Maria

doi:10.1016/j.jbankfin.2015.11.012

Cited by 42 publications

(32 citation statements)

References 73 publications

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“…Our results do not indicate that the number of geographical segments is related to better forecasts. Those results supplement the results of Leung and Verriest (), who did not find strong evidence that firms with improved segment reporting have significantly greater forecast accuracy, and the results of Platikanova and Mattei (), who found that financial analysts issue less accurate earnings forecasts for geographically dispersed firms. Despite the fact that EBITDA forecast accuracy for year 1 is lower for Health Care and Information & Technology industries, our results do not indicate systematic industry or country effects.…”

Section: Results and Commentssupporting

confidence: 83%

The Use of Segment Information by Financial Analysts and Forecast Accuracy: A Study on European Intermediate‐Size Companies

Demerens

Delvaille

Manh

et al. 2016

Thunderbird Intl Bus Rev

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This research investigates the usefulness for financial analysts of segment information disclosed by European intermediate‐size companies reporting under IFRS. While most studies on segment information usefulness focus on the consensus aggregated from financial analysts’ forecasts for blue‐chip companies, our study contributes to the literature by investigating the recommendation reports of financial analysts covering European intermediate‐size companies. The study is based on an original, hand‐collected database obtained from a sample of 339 analysts’ recommendation reports for 146 firms. Our research reveals that though a majority of analysts refer to segment information in their reports, only a few of them use it in their valuation models. Moreover, it also demonstrates that the use of segment information by financial analysts is higher for larger firms than for smaller ones and is not associated with greater forecast accuracy. Hence, our results question the usefulness of segment information disclosures for small firms. © 2016 Wiley Periodicals, Inc.

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Section: Results and Commentssupporting

confidence: 83%

The Use of Segment Information by Financial Analysts and Forecast Accuracy: A Study on European Intermediate‐Size Companies

Demerens

Delvaille

Manh

et al. 2016

Thunderbird Intl Bus Rev

View full text Add to dashboard Cite

show abstract

“…Previous literature (i.e. Geo et al, 2008;Garcia and Norli, 2012;Giroud, 2013;Platikanova and Mattei, 2016;Addoum et al, 2017) has revealed that such business dispersion in different U.S. States influences corporate performance.…”

Section: Introductionmentioning

confidence: 97%

“…Giroud (2013) indicates that firms prefer to build plants near their headquarters in order to perform closer monitoring and increase productivity. Moreover, geographically dispersed business interests have a negative impact on earnings forecasts due to the spatially distributed firm-specific information (e.g., Platikanova and Mattei, 2016;Addoum et al, 2017). Nevertheless, those studies only address the short-term effects of corporate dispersion on firm performance.…”

Section: Introductionmentioning

confidence: 99%

“…Following previous studies (e.g. Garcia and Norli, 2012;Platikanova and Mattei, 2016;Addoum et al, 2017), we use a text-based measure by counting state names from the operations-related sections in the Form 10-K to proxy firms' geographically dispersed business interests. We construct a normalized Herfindahl-Hirschman Index (HHI) to indicate to what extent a firm is geographically dispersed across different U.S. states at the time of going public.…”

Section: Introductionmentioning

confidence: 99%

“…In this study, we argue that geographic dispersion hampers information flow within the organization, which negatively affects management decision-making, thereby exacerbating agency conflicts and giving rise to poor corporate performance and IPO failure. Geographically dispersed firm-specific information results in a reduced ability for managers to completely summarize operating information (Addoum et al, 2017), and increases information disparity between insiders and outsiders (Platikanova and Mattei, 2016). Distance affects information quality when it is transferred between different locations (Petersen and Rajan, 2002), and causes agency conflicts because of the low observability of managers' behaviors (John et al, 2011).…”

Section: Introductionmentioning

confidence: 99%

See 2 more Smart Citations

Stay Concentrated to Survive

Gounopoulos,

Huang

2019

SSRN Journal

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Using a text-based measure as proxy for a firm's geographically dispersed business interests, we document that geographic dispersion increases the probability of failure risk for newly listed firms. We find that the effect is more pronounced in a soft information environment where information is not easily transferrable or verifiable over long distances, and in small communities where managerial social concerns dominate in decision-making. Moreover, we find that firms with spatially distributed business interests are negatively associated with post-IPO operating performance. Overall, the results are consistent with the argument that geographically dispersed firms are subject to internal information asymmetry and divert managerial focus away from shareholder value, which negatively affects corporate performance and eventually results in corporate failure. Our study suggests to corporate world, stay concentrated to survive.

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Chief executive officer power and initial public offering underpricing: Examining the influence of demand‐side cultural power distance

Krause

Chen

Bruton

et al. 2021

Global Strategy Journal

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Research Summary Initial public offering (IPO) underpricing reflects the inability of early investors to capture the full value of an entrepreneurial firm. IPO firms can potentially limit underpricing by signaling wealth protection through lower chief executive officer (CEO) power. Such signaling is particularly challenging for many IPO firms, though, because for those doing business in high‐power‐distance cultures, CEO power can also signal wealth creation, making CEO power a mixed signal for IPO investors. Drawing on signaling theory, we argue that CEO power is positively associated with IPO underpricing, but this relationship weakens for IPO firms doing business in countries with high cultural power distance because the information signaled becomes less clear. The signaling impact of both CEO power and demand‐side cultural power distance weakens, however, when underwriter reputation offers a substitute signal. Managerial Summary This research offers new knowledge for IPO corporate governance practitioners, such as entrepreneurs, venture capitalists, underwriters, and regulators. Specifically, our research demonstrates that the power dynamic in the upper echelons has implications for demand‐side legitimacy or making U.S.‐listed firms more legitimate with international customers. As a result, stockholders and securities analysts who balk at the consolidation of CEO power should consider the potential benefits that such consolidation of power might grant the firm when competing in different cultural environments associated with foreign markets.

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Firm geographic dispersion and financial analysts’ forecasts

Cited by 42 publications

References 73 publications

The Use of Segment Information by Financial Analysts and Forecast Accuracy: A Study on European Intermediate‐Size Companies

The Use of Segment Information by Financial Analysts and Forecast Accuracy: A Study on European Intermediate‐Size Companies

Stay Concentrated to Survive

Chief executive officer power and initial public offering underpricing: Examining the influence of demand‐side cultural power distance

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