An Empirical Study Based On The Effect Of Analyst Coverage On Earnings Management

Recent years, analysts, however, in order to maintain the relationship with the company’s management and the benefit for the investment bank, they release the false information. As the main body of the capital market, the listed company is the main research object, most analysts report needed information from the company’s management who provide the annual information, and information quality depends on the supervision and restraint mechanism because analysts focus on company to produce the so-called "supervision effect". Analysts focus on company, on the contrary, will produce another result, namely under the condition of the analysts to follow up the company, managers may be expected to achieve market under the pressure and take opportunism behavior through earnings manipulation, which analysts focus on company will bring in the "pressure effect". Then, the analyst is playing a watchdog role of inhibition of earnings manipulation, or they will exert too much pressure on managers, leading to untrue information?Based on the A-share listed companies from2009to2011as samples, we collect and inspect analyst attention data manually to study the effect of analyst attention to the companies on earnings management behavior. Due to the earnings management, it is divided into accrued items and real activity of earnings management, the former is likely to be contained in the scope of the accounting system and regulations of moderate adjustment, the latter is the sacrifice of enterprise long-term interest earnings manipulation.Therefore, we discuss whether the attention of analysts can inhibit surplus management of listed companies from the two aspects. The study found that the higher attention of analysts lead to the more experienced analysts of the company,the less accrued earnings management of the project, the relation of the top number of brokerage analyst and accrued earnings management is not significant. And studies have shown that experienced analysts earnings management is significantly negative correlated with real activities, we don’t find, the top number of brokerage analysts has a significant relationship with the real business activities of earnings management. Because analysts tend to follow up the good information environment companies, in this case, the analyst can choose companies with less earnings management. To avoid problems of analysts endogenous, we consider the tools of scale variable, the results remain the same. The above research can provide direction for improving analyst research quality, reputation, and the perfection of corporate governance systems of enterprises.