Migration Fear, Race-Related Biases and Analyst Forecast Accuracy
Publication Date
3-26-2025
Abstract
This study examines whether heightened migration fear impairs minority analysts' ability to access and convey accurate financial information. Using aggregate U.S. newspaper article counts regarding migration fear as a proxy for society wide sentiment about ethnic minorities and a sample of 1.3 million quarterly earnings announcements over 1990-2023, we find that elevated levels of the Migration Fear Index increase absolute forecast errors for Non-White analysts. For the average firm in our sample, a one standard deviation increase in migration fear leads to an additional 4 cents in EPS forecast error for Non-White analysts. Our results are robust across alternative measures of xenophobia, analyst accuracy, entropy-balanced samples, and fixed effects models. Using shocks to migration fear from the launch of the "Make America Great Again" Campaign in 2015, we observe that the shock selectively impairs Non-White analysts' forecast accuracy. Further analyses reveal that migration fear's impact on Non-White analyst forecast accuracy is driven by ethnic out-group bias, as the negative effects of xenophobia on Non-White analysts disappear when the CEO is also Non-White or when the firm is headquartered in a pro-immigrant area. Findings suggest that elevated levels of the Migration Fear Index lead to reduced information sharing with Non-White analysts, limiting their access to private information from management and thereby increasing their forecast error. We find no evidence of migration fear reducing Non-White accuracy through impaired cognitive processing capacity. These findings underscore the role of societal biases in shaping information access across capital markets, potentially hindering both price discovery and minority analysts' career development.
Document Type
Article
Keywords
Migration, immigration, financial analyst, earnings forecasts, earnings announcement, forecast accuracy
Disciplines
Accounting
DOI
10.2139/ssrn.5193858
Source
SMU Cox: Accounting (Topic)
Language
English
