Security Analysts Recommend、Accounting Conservatism And Market Reaction

How the securities analyst works in the securities market is attracting increasingattention，especially in markets which currently ful1of speculation and informationtransfer distortion．As a particular Information intermediary，is securities analyst playthe due role in governance, or played in the opposite? Accounting information is themost important factor in stock pricing， the generation and reporting of whichsignificantly influences stock valuation. Therefore，what is the role of aggressive orconservative accounting in stock pricing?If conservative accounting can stabilizinginvestor sentiment, reducing market volatility or not?Whether conservative accountingcan improve the efficiency of the capital markets or not?This paper researches accounting conservatism and securities analysts recommendson the stock price by theoretical and empirical research, probe the effect of conservativeaccounting on analysts recommend reaction,and proves the decisive influence ofconservative accounting in stock pricing by Measurement view and information view.This paper contains three parts: background and theoretical foundation, theoreticaland empirical analysis,conclusions and recommendations.In the first part,it clarified theresearch background, methods and significance,and summarized the research ofaccounting conservatism and analysts recommends at home and abroad. In the secondpart,it defined concept analyst and conservative accounting, analyses the conflict ofinterest analysts face when they recommend stocks. Actually, analysts recommendationwill lead to higher market turnover and stronger market reaction.However,theoretically,accounting conservatism can restrict administrators’ private behavior,reduce information asymmetry, so the stock prices will reflect the actual situation ofenterprises. Investors will make more rational investment decisions by usinginformation which relatively more conservative. Although it can not elimination thestrong reaction that securities analyst made, accounting conservatism can restrain thereaction.What’s more,companies that use accounting conservatism would have moredevelop potential. Event study is used in the empirical analysis and it demonstrate theeffect of accounting conservatism policy on analyst’s recommending reaction.At last, on the basis of former researchers’achievement,this paper put forwardsome suggestions: firstly, establish proper oversight on securities analysts,such as appropriate civil liability to construct a fair market and increase investors’confidence.Secondly, cultivating qualities and risk awareness of small investors. Thirdly,improve the securities market structure.Lastly, strength the supervision on accountingconservatism, improve the quality of the implementation of accounting standards,mostimportantly, reduce information asymmetry and protect the interests of investors.This paper tries to put forward innovation as follows:Firstly,interdisciplinary and multi-angle study. Combining Behavioral Finance withaccounting conservatism,provide an new inspiration about accounting policy on themarket speculation impact study.Secondly,study the economic consequences ofaccounting conservatism on investor protectionism perspective, enrich the existingresearch. This article provides an empirical evidence that accounting conservatismpolicies have impact on asset pricing.Thirdly,introducing the impact of accountingconservatism into securities analysts recommended stocks effect study,using the periodof [-3,10].This study proves that accounting conservatism policies can effectivelyinhibit the strong market reaction caused by analysts.