How geopolitical risk affects analyst behaviours: Evidence from China

China's accelerated integration with the world also raises focus on the impact of frequent geopolitical risks on China's financial markets. Based on China's geopolitical risk (GPR) index, this study empirically examines the impact of GPR on analyst behaviour. We find that GPR has a significant positive impact on analysts' earnings forecast errors and herd behaviour, thus providing evidence for spillover effects of GPR. Notably, we also find that geopolitical threats have a stronger impact on Chinese analysts' earnings forecast errors and herd behaviour than geopolitical acts. Meanwhile, the cross-sectional test results reveal that the impact of GPR on analyst behaviour is more significant in geopolitically sensitive firms. Another moderating effect is that the quality of information disclosure weakens the forecast error of analysts. The mediating effect analysis further shows that GPR exacerbates analysts' forecast errors and herd behaviour by positively affecting stock price synchronicity.