Breaking the Language Barriers Machine Translation Technology and Analysts’ Forecasts for Multinational Firms

We study the impact of machine translation technology on analysts’ forecasts for multinational firms. Exploiting the staggered rollout of Google Translate’s support to translate foreign languages into English, we find that U.S. analysts improve their forecast accuracy for firms with substantial business exposure in the corresponding foreign countries. The improvement is greater for analysts with limited language skills or brokerage resources to process foreign information. We further find that analysts raise more questions about firms’ foreign exposure during conference calls and incorporate more foreign economic information into their forecasts after the rollout of Google Translate. Our findings highlight the complementary role of publicly accessible technology in supplementing analysts’ skills and resources.