Security Analysts' Behavior And Investor Protection

Chinese security market has developed for about 20 years, and security analyst institution has developed for about 10 years. Now security analysts have been one of necessary participants in the capital market. As a information channel between investors and listed companies, security analysts play an important role in reducing information asymmetry and enhancing investor protection.However, security analysts have both positive and negative effects on investor protection. First, security analysts can reduce information asymmetry between investors and companies, and enhance investor protection. Second, in real world, security analysts may have biased behaviors. These biased behaviors may lead to severe information asymmetry, and finally harm investor protection. There are so many examples to reflect the contrary effects that it is difficult to make sure which effect is true.Domestic research about security analyst is rare. And existing research mainly focus on the information source, analyzing tool and forecast accuracy of security analyst. There is no research about the relationship between analysts'behavior and investor protection. Especially, how security analysts'behavior affects investor protection is not empirically tested.Based on systematic analyses of the relationship between security analyst and investor protection, this paper discusses how security analysts affect investors, empirically tests the influence of security analysts'behavior on investor protection, and finally provides some policy suggestion. In detail, first, this paper analyzes related theory and institution of security analysts, confirms the research topic, sale-side analyst and minority investor protection, and discusses the influence of analyst on investor protection. And based on existing research about investor protection and investment efficiency, this paper selects some measurement variables as basis for empirical research. Second, because the code of security behavior and investor protection is the information asymmetry between investors and companies, and listed companies play an important role in investor protection. According to the investing relation between investors and companies, the investors in the market can be divided into two kinds. So, investor protection can also be divided to two kinds. And the important thing lies in the information disclosure quality and investment efficiency of companies themselves. Third, this paper explores the security analysts'influence on the information between investors and companies, analyzes the influence of analyst behavior on information disclosure quality, and tests the real effect of security analysts on investor protection. At last, this paper explores how security analyst behavior affects management and investment efficiency of firms, analyzes the influence of security analyst on the information asymmetry between investor and managers, and tests the real effects of security analysts on investor protection.Beside introduction, this paper is made up of five parts. The main contents are as follows:Part 1:Literature Review. This part reviews systematically the related oversea and domestic papers about security analysts, makes comments on the existing research, and points out the shortcoming of the existing papers.Part 2:The role mechanism of security analysts and investors protection. This part first reviews the reason for the survival and existence of security analysts, confirms the roles and functions of security analysts, and makes clear the difference between buy-side analysts and sale-side analysts. Second, this part analyzes the security analysts'work, confirms the basis of their conduct, and differentiates the relationship between security analysts and participants in the market. Third, based on theoretical analysis, real cases and existing papers, this part discusses the role security analysts play and the influence of security analysts on investors. Finally, based on the related papers about investor protection and investment efficiency, this paper analyzes the influence of security analysts on investors.Part3:Empirical test of the investor protection which making profits by buying and selling stocks——security analysts'behavior and investor protection index. This part takes advantage of existing measurement of investor protection, explores the influence of security analysts on the information between investors and firms, analyzes the influence of security analysts'behavior on the quality of information disclosure of firms, and tests the real effects of security analysts on investor protection.Part4:Empirical test of the investor protection which making profits by dividents——security analysts'behavior and investment efficiency of firms. This part takes advantage of existing measurement of investment efficiency, explores the influence of security analysts on the management and investment efficiency of firms, analyzes the influence of security analysts on the information asymmetry between investors and management of firms, and tests the real effects of security analysts on investor protection.Part 5:Conclusions and policy suggestion. This part summarizes the main conclusions,'provides some policy suggestion, summarizes the contribution and limitation, and gives some suggestion for further research.The main contributions of this paper are as follows:First, this paper relates security analysts'behavior and investor protection, discusses the influence of security analysts on investor protection. To some extent, this paper improve the existing papers which just study the security analysts from the perspective of conduct and accuracy of earnings forecasts. This paper finds the value of security analysts to reduce information asymmetry and enhance investor protection. This study provides new views for further study.Second, this paper illustrates that the main problem of security analysts and investor protection is the information asymmetry between investors and firms, and the firms themselves affect the level of investor protection. Based on the basic view, this paper further explores the investment relationship between investors and firms, and divides the investor protection into two kinds, and finally obtains two research topics. Obviously, the research views to some extent widen the existing research about security analysts.Third, this paper points out that the tests of the influence of security analysts on investor protection rely on the quality of information disclosure of firms. Based on the investor protection index developed by Meng(2010), this paper empirically tests the real effects of security analysts on investor protection., finds that security analysts do harm to investor protection.Forth, this paper divides the economic incentive into external incentive and internal incentive, and shows that the external economic incentive results in the security analysts'biased behavior. But both these incentives can not disappear. So in order to reduce the biased behavior, the relation between the external incentive and internal incentive should be eliminated. And finally, this paper gives suggestion to prove related institutions and regulations of security analysts.