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

We examine whether the sudden loss of public information search capacity caused by Google’s withdrawal from China affects Chinese analysts’ earnings forecasts. We find that in the period after Google’s withdrawal, analyst forecast accuracy declines, particularly for firms with foreign trade. This decline in analyst forecast accuracy suggests that Google’s withdrawal hinders analysts’ acquisition of firms’ foreign information, which decreases the quality of their earnings forecasts. Consistent with this argument, we find that the effect of Google’s withdrawal is stronger 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.