Research On The Impacts Of Analyst Coverage On Enterprise Financialization

The basic relationship between manufacturing industry and financial industry is financial industry service manufacturing industry.Under this basic relationship,manufacturing industry and financial industry have jointly promoted the healthy development of the national economy.However,in recent years,the development of China's economy has gradually broken this original relationship,and a phenomenon of "distracting from a given goal" has appeared.What is "distracting from a given goal" ? At the micro level,"distracting from a given goal" means the entity enterprise "deviate from their main business" and allocate too much capital to financial assets(including the real estate with financial attributes).From the perspective of the long-term development of the enterprise,enterprise financialization does great harm.On the one hand,if the enterprise expands financial activities,it will squeezes out industrial investment,especially innovation investment,thus damaging the future main business performance of the enterprise.On the other hand,enterprise hold too many financial assets,once the financial crisis occurs,it may causes a devastating blow to the enterprise value in the short term.From the national level,the enterprise financialization will lead to the macro-economy financialization,and the historical law has proved that if a country's macro-economy financialization for a long time,it will lead to the decline of national economy and the outbreak of class contradictions.Therefore,it is of great practical significance for the long-term development of enterprise and the realization of high-quality development of China's economy to explore the factor affecting enterprise financialization in theory.Financial scholars believe that enterprise financialization is an agency problem caused by the separation of ownership and management.Good corporate governance is the key factor to effectively solve the agency problem.Existing studies have noticed the impacts of corporate internal governance on enterprise financialization,but ignored the role of corporate external governance.Internal governance and external governance are complementary.A complete corporate governance structure system must be formed by both.It is not advisable to treat a certain factor one sidedly.External governance and internal governance need to be organically combined to effectively eliminate agency problems.Analyst is not only the information intermediary of the capital market,but also an important external governance mechanism.However,after combing the existing literature related to analyst in corporate governance,it is found that scholars have not formed a unified answer to whether analyst coverage can be transformed into an effective mechanism to restrict opportunism behavior of management.The role of analysts in corporate governance has both positive and negative aspects: "supervision effect" and "performance pressure effect"."Supervision effect" believes that analyst coverage will increase the information transparency of enterprise and reduce the space of opportunism behavior of management,which is conducive to alleviate the agency problem of enterprise."Performance pressure effect" believes that analyst coveage will increase the short-term performance pressure of the management,narrow the investment vision of the management,and promote the further deterioration of agency problems.So,do Impacts of analyst coverage on enterprise financialization and how do they affect enterprise financialization? This is a topic worth exploring.In order to answer the above question,this paper is based on efficient market theory,information asymmetry theory,principal-agent theory and upper echelons theory.Firstly,it theoretically analyzes the relationship between analyst coverage and enterprise financialization,and whether this relationship is different in enterprises with different characteristics.Then,from the perspective of analyst heterogeneity,it further explains the impacts of interest conflict and personal characteristic on the relationship between analyst coverage and enterprise financialization.Finally,this paper selects China's Shanghai and Shenzhen A-share listed companies from 2008 to 2018 as the initial research sample to empirically test the theoretical analysis.The conclusions of this paper are as follows:(1)On the whole,analyst coverage can significantly reduce the degree of enterprise financialization.Distinguishing the types of financial assets,analyst coverage has significantly reduced the proportion of transactional financial assets,investment real estate and long-term financial equity investment,but significantly increased the proportion of shadow financial assets.These results support the "supervision effect".(2)From the perspective of enterprise heterogeneity,the inhibitory effect of analyst coverage will be more significant for enterprises with high degree of information asymmetry,still in the growth stage,high degree of financing constraints and poor development of main business.(3)The conflict of interest faced by analyst will significantly affect the relationship between analyst coverage and enterprise financialization.When the higher the shareholding ratio of institutional investors,the refinancing behavior of listed companies and the listed companie concerned by analysts are the heavy positions of the self-supporting department of security companies,the negative relationship between analyst coverage and enterprise financialization will be weakened.(4)The personal characteristic of analyst will significantly affect the relationship between analyst coverage and enterprise financialization.Female analyst,highly educated analyst,experienced analyst,analyst with industry expertise and star analyst can significantly reduce the degree of enterprise financialization.The innovation of this paper is reflected in three aspects:(1)From the perspective of enterprise financialization,this paper verifies the principal-agent theory that analyst can play a good external governance role.Jesen and Meckling(1976)proposed that analyst is an important corporate governance mechanism that can effectively monitor opportunism behavior of management.The enterprise financialization is a typical agency problem.From the perspective of enterprise financialization,this paper studies the impacts of analyst coverage on enterprise financialization and finds that analyst coverage can inhabit enterprise financialization.This conclusion verifies the view of principal-agent theory that analyst can play a good external governance role.(2)This paper disclosures that the conflict of interest faced by analyst will affects the external governance effect of analyst.The high forecast quality of research reports provided by analyst is an important prerequisite for analyst to play a supervisory role.However,when the previous literatures demonstrate the governance effect of analyst almost based on the assumption that analyst are homogenous,and fail to consider the great difference in the quality of research reports provided by different analyst.Take away the heterogeneity of the analyst,and the conclusions are likely to be much less revelatory.The conflict of interest faced by analyst is an important factor affecting the quality of analysts' forecasts.Therefore,from the perspective of analyst salary mechanism,this paper summarizes three aspects of conflict of interest faced by analyst,studies the moderating effect of conflict of interest on the relationship between analyst coverage and enterprise financialization,and finds that conflict of interest will significantly affects the relationship between analyst coverage and enterprise financialization.This conclusion disclosures that the conflict of interest faced by analyst will affects the external governance effect of analyst.(3)This paper disclosures that the personal characteristic of analyst will affects the external governance effect of analyst.Upper-Echelon theory holds that the difference of senior executive's personal characteristic will affects corporate performance.Analyst is "senior executive" who have no decision-making power,so they will inevitably be affected by their personal characteristics when they predicts the economic consequences of senior executive's strategic decisions.Existing literatures show that analyst with different demographics shows completely different quality of forecasts for the same company.Therefore,analyst at personal characteristics should be brought into the research.From the natural attribute and social attribute characteristic,this paper chooses five variables which can reflect the ability of analyst,to study the regulation of the personal characteristic of analyst on the relationship between analyst coverage and enterprise financialization.This paper finds that personal characteristic significantly influence the relationship between analyst coverage and enterprise financialization.This conclusion disclosures that the personal characteristic of analyst will affects the external governance effect of analyst.