Research On The Relationship Between Corporate Governance, The Choice Of Audit Institutions And The Accuracy Of Earnings Forecast

With the rapid development of capital market and enterprise system, the ownership and management rights gradually separated which results in the phenomenon of information asymmetry in the capital market. In order to reduce the risk of the problem, the listed companies strictly require managers to disclose financial information, announcements, etc. The T year financial report of the listed companies always publish on the third or fifth year in T+1 year, then the majority information of the year report are always historical information, but the existence of time-delay problem of financial information is unable to meet the demand forecast of investors in the changing of the capital market. In order to meet the needs of investors for future financial information, the analyst come into being as a new industry, the securities analyst earnings forecast behavior is gradually increasing as well. From the perspective of the effectiveness of the capital market, the financial information of the listed company is an important source of information for managers and investors to make decisions, and earnings management is the important factors which affect the quality of financial information disclosure, as the means of manipulating earnings for listed companies, it triggered a series of management earnings manipulation.This article mainly from two aspects to conduct the research on the securities analyst earnings forecast accuracy, one is the relationship between research and audit institutions and their earnings forecast accuracy, and the second one is research based on the impact of corporate governance under the audit institutions and their earnings forecast accuracy relations.Firstly, this article summarizes the relevant literature at home and abroad on corporate governance, audit institutions, audit selection as well as earnings forecast accuracy, and the theme of this paper are based on the existing research contents and conclusions. The research hypothesis are put forward based on the principal-agent theory, transaction cost theory, asymmetric information theory, and they are verified from two aspects:firstly, after the selection of the sample, conducted an regression analysis of the data to examine the influence of the audit institutions on securities analyst earnings forecasts; secondly, based on the impact of corporate governance on audit institution, this article added another variable corporate governance as a variable to test the moderating effects of corporate governance on the relationship between audit selection and the prediction accuracy of securities analysts’ earnings. Through the study of the relationship between the two external independent agencies and independent third party, this paper is dedicated to identify the financial information of the listed companies disclosure level, and then, to reveal the manipulate degree about the earnings of listed companies. At the same time, in order to know more about the relationship between the audit agency selection and the predict accuracy of the securities, the corporate governance was put forward as a moderating variable, and the relationship are verified by the empirical data of listed A-share companies from 2009 to 2014.Through empirical study it was found that in this paper:on the one hand, in comparison with the non-international four and non-domestic top six audit institutions, the audit institutions as independent third party organization, the four international or domestic top six audit institutions have competence advantage objectively, like the firm size, brand reputation, the abundant human resources so on. Furthermore, rather than non-international four big and before the big six CPA firms, the four big or the top six audit institutions have more professional team of auditors, and its industry expertise is easier to form scale effect.In general conclusion, the four international or domestic top six audit institutions can provide more comprehensive audit services, and the quality of the information disclosure on their financial report is relatively higher. If the listed companies choose four international or domestic top six as their audit institutions, the quality of information disclosure is much higher, accompanies with the lower manipulation degree of earnings as well as the higher accuracy of Securities analyst. On the other hand, the higher level of corporate governance will motivate the directors and management of the company board to achieve the interests of enterprises, and the perfect governance mechanism can also make them more confident about their management level. In consideration of reducing agency cost, increasing investor confidence as well as improving the company’s overall value, the listed companies are always preferred to choose auditor team with large scale, abundant human client resources, high brand reputation as well as professional teams such as the four international or domestic top six major accounting firms. And then, the quality of financial information disclosure and the transparency of accounting information can be achieved to attract investors and increase the value of the whole enterprise.