The Impact Of Analyst Coverage On Financing Decision

Analysts are important information intermediary in the capital market, plays a dual role of information users and information providers, which have an impact on the behavior of corporate finance through the "Information effect" and "Supervision effect". On the one hand, analyst reports are an important source of information for investors, not only mining and translate the financial informat ion of listed companies, but also predict, provide incremental information, increase liquidity, improve the business environment, and then affecting corporate financing behavior under asymmetric information; on the other hand, through its direct and indirect oversight behavior, analysts can ease the company proxy conflict, suppressed the company’s management to manage earnings and other opportunistic behavior, which affects the increased risk due to corporate systems resulting in increased cost of capital, and thus enhance the company’s value.This paper firstly reviewed the domestic and foreign literature about analyst coverage and financing options, and then based on the capital structure theory, signal transmission theory, efficient market hypothesis and agency theory and established appropriate models to test them. The sample including Shanghai and Shenzhen A-share listed companies is concerned by analysts in the time period 2007 to 2011. The analysts focus on three dimensions: analysts tracking number, analysts predict accuracy, and analysts predict. Empirical study firstly tested the influence of analyst coverage to the internal and external financing decision of enterprise, double and single financing decision, equity and debt financing decision.On this basis, we examined the path of financing decision by lowering the funding costs, and examine the impact of analyst coverage on financing decisions, they alleviate the financial constraints.The results showed that:(1) Analysts coverage promotes external financing of enterprises, and has a more significant role in double financing of equity and debt. In the equity and debt financing, analysts coverage focus on promoting the enterprises’ equity financing.(2) Analysts coverage can reduce the enterprise cost of equity financing and debt financ ing costs, but the low cost of equity financing is more signif icant. Analyst coverage alleviates the financing constraints more, by reducing the cost of equity financing, increasing the equity financing.(3) Analysts ease the company’s financial constraints, by promoting equity and debt financing. Improving the equity financing is the major path to ease enterprises’ financing constraints.The resulting revelat ion:(1) We should expand analysts industry, improve the quality of prediction, increase the ease of the capital market information asymmetry, improve the enterprise information environment, increase the enterprise external supervision, so as to reduce financing cost, broaden the financing channels, to alleviate the financing constraints;(2)We should expand analysts industry influence, prompted the debt market and the stock market information sharing, make sure analys ts play the role of information intermediar ies better;(3) Attaches great importance to the enterprise future earnings information, improve the interest of the creditors’ for the future development of the enterprise, reduce the risk of bad debts, improve the efficiency of capital market allocation of resources;(4) Strengthen the enterprise information disclosure, dredge channels of access to information, an analyst, provide convenience for analysts’ function, to ensure the sound development of capital market.