Foreign exchange exposure and analysts' earnings forecasts

This thesis examines how a firm's exposure to exchange rates affects the properties of analysts' earnings forecasts. All firms, regardless of whether they are involved in international or purely domestic trade, are conceptually affected by changes in currency values. Results suggest that firms with greater foreign exchange exposure have greater analysts' forecast errors and dispersion, and attract lower analyst coverage. Additional tests reveal insights regarding how improved disclosures, annual report readability and analysts' experience can alleviate the negative impacts of foreign exchange exposure. The results of this study have several practical implications for investors, firms, analysts and standard setters.