Investor Protection, Aggregate Accounting Earnings and Forecasts of Growth in GDP: International Evidence.

This study draws on the investor protection literature to examine differences in a country’s information environment that are likely to explain cross country variation in the extent to which macroeconomic forecasters take account of current earnings when forecasting future growth in GDP. Using a unique sample of analysts’ GDP forecasts from thirty countries, we find that economies with stronger levels of disclosure and enforcement regulation have a lower association between changes in aggregate earnings and errors in forecasts of GDP growth. The results are consistent with macroeconomic forecasters in countries with stronger investor protections taking greater account of changes in aggregate earnings when forecasting growth in GDP than analysts in countries with lower levels of investor protection.