Does environmental regulation affect analyst forecast bias? Evidence from China's Low-Carbon Pilot Policy.

This study investigates the impact of China's Low-Carbon Pilot Policy on analyst forecast behaviors. Using a staggered difference-in-difference approach, we find that the program reduced analyst forecast errors and divergence, as mandatory sustainability disclosures enable analysts to incorporate new information to improve forecast quality. The effect is concentrated in state-owned firms and manufacturing-oriented cities. Additional tests explore accounting information quality and investor attention as plausible channels. Overall, exploiting a major Chinese environmental regulation, we provide novel evidence that green policies can enhance transparency and capital market efficiency. The findings offer implications for regulators, investors, and managers as countries pursue climate change mitigation strategies.
Competing Interests: Declaration of competing interest The authors declare that they have no known competing financial interests or personal relationships that could have appeared to influence the work reported in this paper.
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