China Securities Analysts' Forecasts And Earnings Management Research

China' Securities market has been estabished more than twenty years, The system of Securities Analysts also has been established more than ten years. Today, The Securities Analysts played important role which could changed information asymmetry situation and enhance the level of investor protection that has became the indispensable participation in the Capital Markets. They became more and more important. Securities Analysts served as information intermediaries that linked Investors and Listed Companies. Securities Analysts tracked listed companies in order to publish reliable information, They collected market information and company information that impacted variety of asset prices as much as possible, After that, they make a valuable analysis through use a certain valuation methods and their systematic understanding of the Industry. Finally, Securities Analysts publish research report that containing forecasting information and investment advice, thereby increased the breadth and depth of knowledge of decision-markers and ensuring effectively the liquidity of capital in the markets.However, since the1990s, Securities Analysts' earnings forecasts has became threshold standard of earnings for listed companies. The phenomenon of avoid negative earnings surprise everywhere. Securities Analysts'as third-party mediation alleviated the asymmetry information, on the other hand they make management of listed companies to achieve earnings forecasts means positive earnings surprises. With the development of China's capital market, The influence of securities analyst in the capital markets is also growing, How to inhibit management behavior of earnings management to protect the interests of the majority of stakeholders, it become urgently to policy makers. Although recent studies have shown that:Annual audit can inhibit earnings management to pursue price target of Listed Companies (Brown and Pinello,2007); Promulgation and implementation of the Sarbanes-Oxley also able to reduce the level of earnings management (Cohen,2010); Best internal control also have inhibit level of earnings management of listed companies (Fang Hongxing,2011), but there are studies indicate that the implementation of these programs seem require pay for larger cost to investors(Cohen,2010), so scholars has been committed to finding a more economical way to reduce earnings management of listed companies.However, since the1990s, with securities analysts in the capital market more and more important in the middle position, securities analysts' earnings forecasts is becoming the most important results of listed companies threshold criteria, to avoid the phenomenon of negative earnings surprises in the capital market increasingly serious. As a third-party mediation, securities analysts' earnings forecasts reduce the asymmetric information and other related problems, but they induce the management of listed companies to achieve earnings management behavior of positive earnings surprises. With the development of China's capital market, The influence of securities analyst in the capital market is also growing, how to suppress earnings management behavior management to protect the interests of the majority of stakeholders become urgently need to be addressed for policy makers. Although recent studies have shown that:Annual audit can inhibit Earnings Management of Listed Companies to pursue price target generated (Brown and Pinello,2007); Promulgation and implementation of the Sarbanes-Oxley Act also able to reduce the extent of earnings management (Cohen,2010); Quality of internal control for earnings management of listed companies also have inhibitory effects (Fang Hongxing,2011), But there are studies indicate that the implementation of these programs seem to require investors to pay for the cost of a larger consideration (Cohen,2010), thus academia has been committed to finding a more economical way to reduce earnings management of listed companies.This paper constructed theoretical framework of Securities Analysts'forecasts and earnings management based on introduced asymmetric information theory, the efficient market hypothesis, prospect theory and stakeholder theory, empirical analysis the effect of Securities Analysts'double forecasts of earnings and cash flow to earnings management, and study further of the effect of Securities Analysts' double forecasting in the difference nature of companies, and filled in the blanks of Securities Analysts and earnings management research based on the institutional context of "National Nine" of published recently by State Council on the protection of the interests of small investors.This paper firstly reviews the relevant literature of Securities Analysts' forecasts and earnings management, then introduced and theoretical analysis of the efficient market hypothesis and related theories to support research perspective in this paper of Analysts' forecasts and behavior-oriented of earnings management. In the empirical analysis, This paper firstly used BD(1997) empirical analysis method to research the phenomenon of positive earnings surprise of listed companies, then comparative analysis the changed trend of analyst earnings'forecast errors and the level of earnings management of listed companies, in order to get the conclusions of securities analyst' earnings forecasts will induce earnings management. Then, the paper further studies the influence of Securities Analysts' double forecasts for earnings management. This paper selected as observed sample that analysts' published double forecasts of listed companies, and use propensity score matching to find matching samples, research Securities Analysts'double forecasts and real earnings management and accrual earnings management and found that Securities Analysts' double forecasts can effectively inhibit the level of accrued earnings management of listed company, but enhance the level of real earnings management. Finally, we use the Logit model to study of Securities Analysts' double forecasts of listed company and The substitution effect of earnings management, and expanding analysis combined with the nature of ownership of listed companies. This paper found that Securities Analysts' double forecasts can effectively inhibit the earnings management behavior, reducing the level of management to achieve positive earnings surprises, but also for the different nature of the Company's property, this inhibitory effect was significant difference.The paper is organized as follows:Part ?:Introduction, this paper introduces the research background, significance, research ideas, the structure and the innovation.Part ?:Literature Review, this section introduce the relevant literature that include Securities Analysts' earnings forecasts and cash flow forecasts, as well as the concept of earnings management, performance expectations and earnings management, earnings management, summarizes the Academic achievements of Securities Analysts' forecasts and Earnings Management at home and abroad in recent years, and review existing literature. Part ?:Institutional Background, Firstly in this section introduced the classification of Securities Analysts, role and development; Secondly, has been clear Securities Analysts'professional orientation about the current system in our country under the background in China; Then from both internal and external actors articulate the relationship between Securities Analysts and market players, combined with the relevant content of "National Nine" that newly issued systems introduce the regulatory status of Securities Analysts in China.Part ?:Theoretical Basis, This part systematically analyzes the basic theory related to Securities Analysts'forecasts and earnings management, and discusses the relationship between theory and Securities Analysts'forecast and earnings management. Based on the efficient market hypothesis and asymmetric information theoretical, Securities analysts is necessity, the analysts'forecast changed information asymmetry and improve the efficiency of capital allocation in the securities markets; Under the management of prospect theory, because preferences of aversion loss, Securities analysts' earnings forecasts as performance measures that deepened the level of earnings management in the securities market, Based on the stakeholder theory argument, the relationship between the efficient allocation of capital, Securities Analysts and earnings management, constructed theoretical framework for later study.Part ?:Securities Analysts'Earnings Forecasts and Earnings Management Research, This paper firstly used BD(1997) empirical analysis method to research the phenomenon of positive earnings surprise of listed companies, the study found in0earnings threshold, there number of positive earnings surprises and unexpected negative earnings of listed companies frequency distribution is not smooth, get the conclusions of securities analysts'earnings forecasts will induce earnings management. The earnings error between0-20%in earnings management behavior is most significant. This is conclusion consistent with Zhang Yuejin and Jin Xicheng (2006) that can be seen from the mean analysis, the prediction error more biger, the level of earnings management more deeper.Part ?:Analysts' double Forecasts and Accrual Earnings Management and Real Earnings Management Studies, This paper selected as observed sample that analysts' published double forecasts of listed companies, and use propensity score matching to find matching samples, research Securities Analysts' double forecasts and real earnings management and accrual earnings management, the observed sample are1875from2002-2011,the matching sample are849, then use difference-in-difference to research and found that Securities Analysts' double forecasts can effectively inhibit the level of accrued earnings management of listed company and this inhibitory effect in non-state-owned listed companies is more significant, but it could enhance the level of real earnings management.Part ?:Analysts' double Forecasts and The substitution effect of Earnings Management, this section build Logit model to research the relationship between Securities Analysts' double forecasts and the behavior that management meeting or beating Securities Analysts' earnings forecasts. This paper found that Analysts' double forecasts could weaken the substitution of Earnings Management. In further studies, Based on the difference non-state-owned listed companies and listed companies, The research have been two grouped regression, the study found that inhibition effect of Analysts' double forecasts for non-state-owned listed company more significantly.Part ?:Conclusions and Suggestions, This part summarizes the main conclusions of this study, introduces the contribution of this study, and put forward the relevant policy suggestion, and the development of future research.Innovation of this paper include:First, this paper demonstrated the mechanism of Securities Analysts' forecasts and Earnings Management behavior based on the system of asymmetric information theory, the efficient market hypothesis, the basis of prospect theory and stakeholder theory:Information Asymmetry?Securities Analysts' Forecast?Earnings Management?efficient allocation of Capital, established research ideas of the effect of securities analysts' double forecasts about earnings management this paper provided literature foundation on in-depth study of investor protection in the future.Second, This article applied difference-in-difference and propensity score matching method and Logit models being to the empirical analysis, in-depth study of Securities Analysts' double forecasts for accrued earnings management, real earnings management and the substitution effect of earnings management and binding properties characteristic property of a listed company, to build a virtual interactive variables and using two group regress to further expand our analysis of securities analysts' double predict differential effects for different Ownership structure companies.Third, the paper based on technology line that Analysts' earnings forecasts and Earnings Management?Analysts' double Forecast of Earnings and Cash Flow and Accrued and Real earnings management?Analysts' double Forecasts and The substitution of Earnings Management, realized from Securities Analysts' single earnings forecast oriented to Securities Analysts' double forecasts impact on the level of earnings management, expanding the field of research on the effectiveness of Securities Analysts' forecast information, and its conclusions opened up the new perspective about Securities Analyst' forecast information and management behavioral constraints in order to improve the efficiency of decision-making for investor.