An Analysis Of The Influencing Factors Of Analytic Analges Earnings

Based on the self-interest of sell-side analysts, this paper studies factors that influencing their degree of optimism about profit forecasts, and also prove that sell-side analyst could achieve higher commissions with promoting stock trading by optimistic profit forecasts.Drawing from Jackson’s theoretical model (2005), this paper believes that sell-side analysts make profit forecasts grounded on a number of factors. On one hand, they consider influences on stock trading volume which will decides their short-term gains; on the other hand, they take affect to their reputations and powers into consideration, which determines their long-term gains. With balance to both and prevalent restrictions on short-selling, reports on profits forecasts from sell-side analysts are more inclined to be over optimistic.Sell-side profit forecasts data of listed company trading at Shenzhen Stock Exchange from Wind Consulting Data Base are taken as samples for this paper. With this sample, it is verified that sell-side analysts are capable of promoting stocking trading volume by adjusting profit forecasts, as well as considering a wide variety of factors so that they can maximize their own interest. These factors include Information asymmetry, degree of analysts’attention, characters of market and company or their security company. Compared to existed research, this paper successfully explain the over optimism among sell-side analysts’profit forecasts from the aspect analysts’seek for maximizing self-interest, and pays extra attention on influencing factors which determine how optimistic they will be. This paper has performed empirical test with large amount of data, which ensures its credibility and generosity. This paper offers a new thinking method about the over optimism among sell-side analysts for the academic word, and also provides theoretical foundation for supervising organization and investors.