Does Social Trust Affect Analysts' Forecast? Evidence from China

Using a sample of companies listed in the Chinese stock market between 2007 and 2019, this article investigates the effect of social trust on analysts' forecasts. Our results show that regional social trust can lower analysts' forecast errors and analysts' forecast dispersion, that is, it improves analysts' forecast quality. The institutional environment and state-owned property exacerbate these positive effects. Furthermore, the role of social trust in improving the quality of analysts' forecasts is more significant in listed companies with a poor information environment. We also find that social trust improves analysts' forecast quality by improving earnings quality. After some robustness tests, our main conclusions are still valid. Overall, the findings reveal social trust affects analyst's forecasts.