| Learned from the Western literature, the securities analyst is very important force of the mature capital market, sell-side analysts who serve as information intermediary link with investors and listed companies and are very important disseminators of company information. In order to effectively convey information to the stock market and raise the information content of stock price, they will closely follow the covered listed companies, through reading the financial statements and having an interview studies and other extensive channels, as far as possible to collect various information which influence asset prices,such as market information, industry information,company information and so on.Subsequently they use certain valuation methods and make a valuable investment analysis. Finally, the research report with earnings forecast and investment suggestions will be released to investors, thereby increasing the breadth and depth of investor awareness and effectively ensuring market liquidity, eventually it enhance the financing efficiency of listed companies.However, as we all know, China stock market is different from the U.S. mature stock markets and is still in the emerging and transitional stage. As we all know, the capital market of China is different from the U.S. capital markets. And now it is still in the emerging and transitional stage.The predecessor of the securities analyst is called stock reviewer. Without sound legal system in the initial stage of development, a lot of stock reviewers misled investors by use of false information and some of them become noise source of stock market. The behavior of manipulation of stock prices seriously damaged the interests of investors and its own reputation. With a series of cases of insider trading explosed, investors have begun to question the value of the information released by the securities analyst, and they are labelled black mouth of the stock market. Until the late 1990s, some of them have begun to differentiate out, and gradually developed into the securities analyst with modern significance. Soon after, with the introduction of code of professional ethics and the development of institutional investors, especially the introduction of QFII, the times of sell-side analyst has arrived.The question that we are concerned about is whether they get rid of the bad reputation of black mouth of stock market, or whether the securities analysts' systematic behaviour of misleading investors still existed.In addition to that, another question has come into our notice. When more and more companies are keen to the management of investor relations, in particular, attracting of analysts following (or concerns), then we have to ask why the listed companies do that. Or to put it another way, what's the impact of analyst following on corporate financing? In this paper, we re-examine the market function of analysts following under the environment of the emerging and transitional capital market.China stock market has the unique mechanism of operation and monitoring. Corresponding to it, the securities analyst groups also has its own characteristics in the knowledge structure, work experience and the relationship of the interests Therefore, whether or not the conclusions of the study abroad apply to China need further research.At the present time, the domestic research about the market function of analyst following is still in its infancy, because of its short history and scarce data resources. Existing studies have been scattered and lacked of systematic analysis. Among these studies, most scholars have centered on the issue of information content of analyst forecasts and accuracy of analyst forecasts relative to the prediction of the statistical model and management forecasts, and only few studies centered on the issue of analyst following, So we should as quickly as possible carry out the research on the market efficiency of analyst following. Besides that, it is of great significance for enhancing the learning about the market function of the securities analyst.In this paper, I adopt archival research to analyze the role of securities analysts as information intermediaries involved in the process of stock pricing and explain the unique function of securities analyst in the realization of financing efficiency of the stock market. I treat analyst following which is an important indicator variable as the breakthrough point, and study the function of analyst following in the promoting the effectiveness of market information.If the securities analyst can improve the efficiency of information transmission, then the next question we face is that what role the securities analysts play in promoting the efficiency of resources allocation. In the following discussion, I examine the impact of analyst following on the financing efficiency such as financing cost, the arrangement of financing structure and financing capability. As to the study of financing cost, I haven't directly test the relationship between the analyst following and financing cost, but inferred from one side by using the investment model of Euler equation. The reason is that the company's investment cash flow sensitivity is closely related to the cost of external financing in this model, furthermore this model make the investment and financing of the company closely together which well reveal the financing efficiency.This paper is divided into seven chapters, as follows:In the first part which is the first chapter of this article, I propose the problem, significance, research ideas and research methods. The second part is about theoretical analysis and system background. The third part is literature review. According to the research ideas of this paper, I have conducted a review of classic literature and systematically organized and summarized it. From it, I find in spite of the much more studies about mature capital markets, there are rather few studies about emerging capital markets.The fourth chapter is one of the core of this paper, and in which I examine the relation between analyst following and information efficiency. At present, scholars have heated discussion about whether the securities analysts provide the investors with market-level information or the company level information. We use synchronicity of the stock prices as a proxy for information content of stock price and test whether the securities analyst can release the idiosyncratic information about the company which is tracked, rather than market level information and industry information, and promote the information efficiency of the stock price. The results of the fourth chapter show that the securities analysts have provided the investors with firm level information which reduced the information asymmetry between the managers of the company and outside investors, and then enhanced the information content of the stock price. In addition to that, I have also found that the securities analysts can effectively inhibit the phenomenon of the crash of stock price.In the fifth and sixth chapter, I have discussed the impact of analyst following on the financing efficiency. Specifically, in the fifth partâ… have researched whether the securities analyst can alleviate the financial constraints of the company by affecting the information asymmetry between the managers and the outside investors and thus promote the financing efficiency of the company. That is to say, from the perspective of information intermediary. I have studied the market value of the securities analyst. In the process of the empirical research, I have added the variable of analyst following to the Euler equation investment model and observed the changes of investment-cash flow sensitivity to verify whether or not the securities analysts have alleviated the external financing constraint.The result has showed that analyst following can significantly reduce the high investment-cash flow sensitivity of the private enterprises. So the main hypothesis is confirmed. The result of this paper has also provided empirical evidence for the manager of listed company actively implementing the investor relations management.In the sixth chapter, I have mainly studied how the securities analysts affect the financing capacity and the arrangement of financing structure, controlling the factor of the company features, I have adopted OLS model and Mlogit model to conduct this research.The result show that analysts has a significant effect on the equity financing of the listed, and the effect has gradually weakened with the company's growing size. In addition, when the company followed by more analysts, compare with the probability of the larger amount of equity issuance, the company has the greater probability of issuing small amount equity. At the same time, we found that analyst dispersion is positively correlated with the possibility of debt financing. Our research from the angle of market function of securities analysts has opened up a new research directions for the study of corporate finance theory.The seventh chapter is about the conclusions and study limitations. In it, we have summarized the main conclusions and pointed out the difficulty which can't be overcome and study limitations. At the same time, I have also proposed the direction of future research.The innovation of this article lies in as following:At present, more scholars have studied the value of earning forecast, information channels, interest conflicts that the securities analysts faced with and so on. So few scholars pay close attention to analyst following. Firstly, based on the study background of China's transition economies, I have studied the market function of analyst following mainly from the perspective of information efficiency and resource allocation efficiency. Compare to the existing research, this article is more systematic and comprehensive.Secondly, in China, many scholars research the financing strategy of the listed from the perspective of financial characteristics.For example, profitability, size, growth, asset structures and so on. Few scholars studied how the company's external factors affect the specific type of financing structure, such as the size of debt-financing ratio, the size of equity financing, etc. The purpose of this article was to test how the securities analysts affect the company's financing decision in China's emerging capital market environment. Our research from the angle of market function of securities analysts has opened up a new direction in the corporate financing theory.Thirdly, analyst following, the accuracy of analyst forecasts, and the consistency of analyst forecasts are three important components of the attributes of analyst forecast. In western countries, the related research is much more than in China, whether normative study or empirical study. Besides the research on analyst following, this article has also discussed forecast accuracy and consistency of the securities analysts. Therefore it added to some new references for the existing literature in China.
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