Empirical Research On Banking Securities Analysts’ Earnings Forecast In China

In recent years, China’s stock market has gained rapid development, not only from the number of listed companies:until March21st,2012, Chinese A-share market has had2337listed stocks, but also investment concepts, investors had been beginning to concern the company’s fundamentals. The company’s operating conditions can’t satisfy investors, but the company’s future operating conditions is of the utmost concern including the company’s future assets, liabilities, profits and cash flow. It is also the subject of this article, earnings forecasts. There are three main sources of earnings forecast, based on statistical models, based on the earning preannouncement of the company’s management, based on the earnings reports of securities analysts, securities analysts’ earnings forecasts probably are the most common, and most importantly.Served by institutional and type of work, securities analysts can be divided into the sell-side analysts, buy-side analysts and independent analysts. This article is focusing on the sell-side analysts. The sell-side analysts write research reports, and provide them free of charge. The researching reports provide investors with the expected information of the listed companies’ assets, liabilities, profits and cash flow. These forecasts have greatly improved the information asymmetry between listed companies and investors.Because of the importance of the Securities analysts’ earnings forecasts, the scholars at home and abroad concern more. Most scholars believe that securities analysts’ earnings forecasts are valuable. However, whether the securities analysts’ earnings forecast are valuable depends on the accuracy of their earnings forecasts. The main factors of the system, market, company-specific and securities analyst themselves are the four constraints. Due to the availability of data, this study is concerning about the market factors and company-special factors.Because of the importance and the particularity of the macro-control, we choose Banking as the object of our paper. We are trying to research the accuracy of the banking securities analysts’earnings forecast, as well as the factors which influence accuracy the banking securities’ analyst earnings forecast. In this paper, the content and framework are as follows:Chapter1:Introduction. This chapter introduces the research background, the objective and the meaning of the paper.Chapter2:The related concepts and relevant theories. Firstly, we define the concept of the Banking Securities analyst, earnings forecasts, the market states. Secondly, introduce the efficient market hypothesis, asymmetric information, behavioral finance.Chapter3:Summary of related articles of the Securities analyst earnings forecast. This paper systematically sort out the relevant articles on securities analyst earnings forecasts by three parts, the first pars is the influencing factors of the accuracy of securities analysts’ earnings forecast, second is the analyst optimism, and the other.Chapter4:The first aspect of the empirical research about whether the different market states affect the accuracy of the banking securities analysts’ earnings forecast. Based on data from2008to2010, we make a comparison of statistical analysis between population and samples divided by different market states. Then we use independent samples t-test analysis to verify the accuracy’s characteristics of the banking securities analysts’ earnings forecast in the different market states. Finally, we draw a conclusion and give the reason.Chapter5:The second aspect of the empirical research about the company-special characteristics influencing factors to the accuracy of the banking securities analysts’ earnings forecast. There are five factors of the listed banks’ size, the growth rate of the company, company’s forecasting feasibility, historical earnings’volatility, the bank’s attention by the securities analysts. Using the cross-sectional data of2009,2010, we construct a multiple linear regression model of the accuracy of the analyst earnings forecast to the five variables described in detail above to explain their relevance.Chapter6:conclusions and recommendations. This chapter briefly summarizes the paper framework and gives some appropriate policy recommendations.The main contribution of this paper lies in:(1) It may be the original insight to study the analysts of the banking securities in the different market states. we select the absolute error of the Bank Securities analysts which is the difference between the EPS of forecasting and actual EPS to make a comparison in the different market states, draw a conclusion that as for the banking industrial under the national macro-control, different market states don’t exert a major influence to the accuracy of the banking securities analysts’ earnings forecast which we expected.(2)This study stand from the banking sell-side analysts, based on a cross-sectional data from2009and2010from A-share in China provided by CSMAR database, construct a multiple linear regression model, use some company-special factors such as the listed banks’size, the growth rate, company’s forecasting feasibility, historical earnings’ volatility, the bank’s attention by the securities analysts to interpret the accuracy of the Banking Securities analysts’ earnings forecasts.