Does a sudden breakdown in public information search impair analyst forecast accuracy? Evidence from China

We examine the effect of the sudden breakdown of public information search capability caused by Google’s withdrawal from mainland China on Chinese analysts’ earnings forecasts. We observe a decrease in analysts’ forecast accuracy regarding firms with foreign trade relative to those without foreign trade post-withdrawal. This decrease suggests that Google’s withdrawal has hindered analysts’ acquisition of information about firms with foreign trade, thus decreasing the quality of their earnings forecasts. We also find that the effect of this withdrawal on forecast accuracy is stronger for firms with higher business complexity and more opaque financial reporting and for analysts with weaker information processing capacity and more attention constraints. Additionally, we identify corporate site visits as an alternative information source that can compensate for the information loss caused by Google’s withdrawal and find that decreasing forecast accuracy has partially contributed to the deterioration of capital market conditions in the post-withdrawal era.