An Empirical Research On The Security Analyst Following In China

Security Analysts follow companies to make earnings forecast and give the investors special advice. The market will react to analyst following. There is a large body of research on the determinations of analyst following and the efficiency of information supply by analysts. But the conclusions from American research are not applicable in China because of the differences between the securities market conditions in America and in China, especially the differences between the institutional background of security analysts in America and in China. So, we should explore the research on the analyst following in China's share market.Based on the sample of the listed companies of Shanghai and Shenzhen stock markets from 2005 to 2007, this paper analyzes the firm characteristics which will influence on analyst following, and then constructs a stimulation model to study the efficiency of information supply of analysts whether they generate firm-special information or market-information.This paper includes six parts. Part 1 introduces a research background, contents and significance, the framework of this paper. Part 2 introduces the summary of securities analysts, includes their definition, the development phase and their main behaviors. Part 3 introduces literature reviews, includes the determinants of analyst following and the efficiency of information supply of analysts. And then discusses the main behaviors of security analysts in securities market. Part 4 is about the research design, which describes details of the data sources, sample selection, the definition and calculation of research variables, theoretical analysis and research supposition. The content of part 5 is description and analysis of the empirical results. Part 6 is the conclusion of the study and enlightenment of this paper, and puts forward the limitations of this study, makes recommendations on the improvement direction of follow-up studies.As a result, this paper gets some important findings just as follows:Firstly, the level of analyst following for a firm was positively associated with level of firm size, the percentage of theirs shares held by institutions, the growth of firms, the earnings quality and a negative association with the variability of returns, age of the companies.Secondly, the firms that are followed by more analysts exhibit higher stock return synchronicity, which may mean analysts tend to generate market information but not firm-specific information. And then the paper analyzes the reasons from the perspective of disclosure, speculation mood and analysts diathesis.Finally, this paper not only enriches the research about analyst following in China, but also provides some suggestion for the development of the analysts industry.