COVID-19 Pandemic, Hate Crimes, and Analyst Forecast Quality

We examine how forecast behaviors of East Asian financial analysts would change in the face of the escalated crimes against Asians amid the COVID-19 pandemic. Using a Difference-in-Differences approach, we demonstrate that the forecast quality of East Asian analysts deteriorates during the pandemic. In particular, compared with non-East-Asian analysts, East Asian analysts issue financial forecasts with lower degree of boldness, higher degree of pessimism, lower updating frequency, and less timely during the pandemic. Utilizing a staggered Difference-in-Differences approach, we identify Anti-Asian hate crimes and prolonged societal pressures stemming from the aftermath of the pandemic as the major causes for the inferior performance of East Asian analysts. Consequently, the inferior forecast quality of East Asian financial analysts has a negative effect on post-earnings announcement abnormal returns. Our findings imply that social bias and violence against a certain ethnic group have detrimental impacts on analyst forecast quality and market efficiency.