Does a Sudden Breakdown in Public Information Searches Impede Analyst Forecast Accuracy? Evidence from Google’s Withdrawal from China

We examine the potential effects of the sudden loss of public information search capacity caused by Google’s withdrawal from China on Chinese analysts’ earnings forecasts. We observe a decline in analyst forecast accuracy for firms with foreign trade relative to firms without foreign trade after Google’s withdrawal. This decline in analyst forecast accuracy suggests that Google’s withdrawal hinders analysts’ acquisition of foreign information on firms, which decreases the quality of their earnings forecasts. Consistent with this argument, we find that Google’s withdrawal has a stronger effect on the accuracy of forecasts for firms with greater business complexity and more opaque financial reporting. We also find that corporate site visits serve as an alternative information source that can compensate for the information loss caused by Google’s withdrawal. Our evidence suggests a potential cost of limiting the flow of public information about firms in the capital market.