The effect of cultural distance between an analyst and a CEO on analysts’ earnings forecast performance

Abstract We examine how cultural distance between an analyst and a CEO is associated with earnings forecast performance. Using a sample of 283,062 analyst-firm-year earnings forecasts over the period 1992–2016, we find that greater cultural distance is associated with greater forecast error. This finding is robust to the use of alternative culture frameworks. We further document that our result is mainly driven by a culture effect rather than bilateral trust or a shared common language.