Study On The Influence Of Securities Analysts Following On Investment Efficiency

With the continuous development of the capital market, in order to meet investor demand interpretation of company information, as well as to enhance the efficiency of the investment companies to transmit information to the market, securities analysts came into being. Securities analysts have aroused extensive attention from the market as well as academic field because of its practical significance and academic value. Securities analysts, as information intermediaries in the market, are the product of market self-improvement mechanisms. They appeared to meet investors’demand for investment-related information and to meet the listed companies’need to improve information disclosure correlation. The practicing value of securities analysts is to alleviate the information asymmetry between the market investors and companies to improve the investors’efficiency, thereby enhancing the efficiency of the company’s investment by inhibiting non-efficiency investments to protect market investors. However, the exposure of wrong prediction from securities analysts in the media in recent years did harm to interests of investors, affecting the image and reputation of Chinese securities analysts seriously. Therefore, the existence of securities analyst is a "double-edged sword", on one hand, they are information intermediaries in the market to improve the efficiency of the company’s investment by reducing information asymmetry between investors and companies; on the other hand, securities analysts in fact can’t remain objective independence in practice because of conflicts of interest which exacerbates investors with information asymmetry and reduces the efficiency of the company’s investment. Therefore, research in this paper will be carried out from the influence on investment efficiency shed by the securities analysts to study whether securities analysts can play the role as the legal protection of investors to reduce the information asymmetry and improve the transparency of information.This paper will carry on an empirical test on securities analysts’impact on the company’s investment efficiency. A further test about this issue from different natures of property rights will be also carried out to make relevant policies on this basis. Specifically, this article is divided into six parts. In addition to the introduction, there are five parts as follows:The second part is literature review. This section is mainly a review of previous researches on securities analyst from two aspects:securities analyst earnings forecasts and follow-up study on the securities analyst.The third part is to explain related theoretical foundation and institutional background. This paper is based on three theories:the efficient market hypothesis, the principal-agent theory, asymmetric information theory. Background about the system of securities analysts are mainly from the classification of securities analysts, development status, influence.The fourth part is the theoretical analysis and hypotheses. This section combines theory and reality by case-study assumptions. Because the security analyst is a "double-edged sword", so this part concludes two opposing assumptions. The reasons are that, one is that securities analysts are information intermediaries which can reduce the information asymmetry of investors and companies to improve investment efficiency and information transparency. The other is that securities analysts will publish the information exacerbating investor information asymmetry and reducing the company’s investment efficiency.The fifth part is research design and empirical test. The part is the core part for it will define various variables, build the model and give out the regression results of the final regression.In all samples, the regression results show that securities analysts’following is in a significant positive correlation with excessive investment and insufficient investment. In samples of state-controlled, securities analysts follow up with the company, the overinvestment and underinvestment in the company will be more serious.In non-state-owned samples, securities analysts following is in a significant positive correlation with overinvestment and the relationship between securities analysts following and underinvestment is not significant.Part VI is the conclusions and inspiration. This section comprehensively summarizes the results of the regression, and put forward policies recommendations. Innovations and deficiencies of this article are listed as follows:First, from the perspective of enterprise financial behavior, this paper studies the effects of the securities analyst to follow up on the corporate investment efficiency, which is helpful to further reveal the influence of securities analyst behavior in the market, which is helpful to further reveal the real impact of securities analyst in reducing information asymmetry and supervision of corporate behavior and investor protection, but also which enriches the literature on the subject.Second, by choosing the efficiency of investment as an entry point, with the help of Richardson (2006) model to measure over-investment and under-investment from investment efficiency perspective, empirical tests about securities analysts’ following is carried out to find that the probability of over-investment and under-investment will be larger after arising securities analysts’ attention. And the paper further studied that under the different nature of the property, securities analysts follow up impact on investment efficiency.Due to the limitations of the research subjects and the lack of references, in this research there are still some inadequacies. First, when discuss analysts’ following and companies’ operating efficiency, the existing research conclusions and model variables are direct used, may leading to some important factors missing. Besides, this paper does not do an empirical test on the intrinsic factors affecting securities analyst behavior. Third, the measure of the efficiency of investment directly uses the model of Richardson (2006), but the model itself has some shortcomings. Forth, the paper does not further subdivide state-owned enterprises according to the different degree of government intervention.