Climate policy uncertainty and analyst earnings forecasts: Evidence from the Chinese energy sector

Abstract

We investigate whether climate policy uncertainty affects analysts' earnings forecasts. Using 51,986 analyst forecasting data from China's energy sector for 2009–2021, we find that climate policy uncertainty results in lower analysts' earnings forecasts. Our finding is consistent with the deterioration of the company's fundamentals. Heterogeneity analysis shows that climate policy uncertainty's “correction effect” on analysts' optimistic forecasts is more effective among firms with worse ESG performance and higher pollution levels. Additional analysis suggests that analysts' revision behavior is only present in the sample of optimistic forecasts and that the “correction effect” improves the accuracy of analysts' forecasts.