The Impact of Strategy, Industry and Culture On Forecasting The Performance of Global Competitors: A Strategic Perspective

Abstract

This study examines how business strategy, industry competitive environmentand national culture affect the accuracy and level of agreement among financialanalysts who predict the future earnings of international competitors. Recentresearch has reported the increasing importance played by financial analystsregarding the stock price and market value of firms. Analysts' forecasts ofpeiformance have been found to significantly affect the cost of capital, valuationand stock price changes of firms. As the incidence of cross-national mergers andacquisitions continues to escalate, understanding factors that systematically affectperformance predictions becomes increasingly important, especially for firmsemploying cross-national merger or acquisition strategies. We find that businessstrategies affect the accuracy of analysts' performance estimates while nationalculture plays an important role in determining the level of agreement amonganalysts' predictions. Implications and plans of action for internationalmanagement practitioners and researchers are discussed.