A Study On The Influencing Factors Of Securities Analysts' Field Investigation

Security analysts are important participants in capital market. They provide different types of information to the whole market and help to reduce the degree of information asymmetry. As a consequence, investors can obtain more information to help themselves make proper investment decisions. There are two main kinds of information coming from analysts, the one is processed information from public sources by analysts with their professional knowledge and ability, the other is totally new information collected by analysts from followed companies. Therefore, analysts possess many information sources such as company reports, press conferences, phone visits, site visits, private communications with company members and kinds of media reports. Existing papers have shown that site visit is one of the sources from which analysts can get the most deeply and credible information. However, the cost of site visit is relatively higher than any other information collecting method. Analysts need to balance cost and profit before they make a decision on site visit. Factors of company level as well as analyst level will affect analysts’ decision, and this paper researches the company level influencing factors of analysts’site visits.This paper researches from the perspective of information, which contains three aspects including inside characters, outside demand and the communication between inside and outside. The first is information content, the second.is information demander, and the third is information disclosure. The uncertainty of information content, the transparency of information disclosure and the shareholding of institutional investors will all affect the site visit decisions made by analysts. I select a sample containing all firms listed on the main board of Shenzhen stock exchange and followed by at least one analyst between2008and2010and carry out two empirical researches. The first one’s explained variable is a dummy variable representing whether there is a site visit, and the other one’s explained variable is one representing the number of site visits in a certain year. Information uncertainty’s proxy variables are the revenue’s average growth rate, the operating profit’s standard deviation coefficient and the intangible asset proportion excluding all of their industry influences. Information transparency’s proxy variable is the companies’credit records of previous year provided by the Shenzhen stock exchange. Institutional investors’shareholding’s proxy variable is a dummy variable representing whether there is any institutional investor in the previous year. From two perspectives, I carry out the empirical research with two models including a logistic regression and a tobit regression. The consequence of the first empirical research shows that the higher of the information uncertainty level, the information transparency level and the institutional investors’position in a company, the higher of the probability about analysts’site visit. The second research shows that the site visit frequency will get higher as the variance of operating profit gets lower, while the other two proxy variables of information uncertainty, which are the revenue’s average growth rate and the intangible asset proportion, have insignificant effects on site visit frequency. Information transparency and institutional investors’shareholding have significant effects, that is the higher of the information transparency level and the institutional investors’position in a company, the higher of the frequency about analysts’ site visit.