A-share Sell-side Analysts Is Independent

This paper studies sell-side analysts’ behavior of earning forecast following after management forecast on China’s A share market, and examines several factors which may exert influence on analyst following, including management forecast reputation, management forecast feature, earning feature and market feature.This paper uses the expectation difference between analyst forecast and management forecast to character the "divergence" variable. Empirical study shows a significant negative relationship between convergence of divergence and the divergence one week before announcement, which verifies analysts’following behavior.This paper adopts prior management forecast error as agent variable of management forecast reputation, and finds a relationship between timing of management forecast and correlation between divergence convergence and prior management forecast error. Divergence convergence shows a positive correlation with prior management forecast error in the group before31st Dec and a negative correlation after. The contrary result indicates that analysts regard short-term private information as more important when they evaluate management forecast reputation.Further study examines the influence of management forecast features on analysts following behavior. We found that analysts have a strong tendency to follow a point precision type, while they have a less tendency to follow management forecast announced after31st Dec.Using numbers of variables as agency, this paper also explores the influence of earning features and market features on analysts following behavior. We found that analysts tend to follow a company that is covered by more institutions before management earning forecast disclosure. The results of this paper also reveal that by following management earning forecast, an analyst reduces his forecast error, thus decreases information asymmetric.This paper verifies analysts following behavior after management earning forecast, and that by following management earning forecast, an analyst reduces his forecast error. Our conclusion is a useful supplement to academic research, and may help managements better understand analysts’behavior, thus reduce the information asymmetric by management earning forecast.