The Impact Of Analyst Following On The Choice Of Accrual Earnings Management And Real Earnings Management

As the information transmission role between the listed companies and securities market participants, securities analysts play a dual role in the capital market,which is universally recognized by many scholars, that is to say the information intermediary role to reading and analyzing financial reports as well as the external monitor of constraint management behavior. Based on the earning management's capital market motivation, Burgstahler et al. researchers suggested that managers in the listed companies have the motivation to manage earnings in order to reduce the earnings surplus, avoid losses and cater to analysts'earnings forecasts. Subsequent scholars have also studied the impact of analyst following on earnings management, on the one hand, some scholars'research suggested that analyst following has a monitor effect on earning management, i.e., the more analyst followed, the less earnings management will be; on the other hand, other scholars' research documented that analyst following has a pressure influence on earnings management, i.e., the more analyst followed, the more earnings management will be. However, these studies are mainly focused on the accrual earnings management. As a matter of fact, earnings management also include real earning management, which is more concealment and damage firm value stronger. Therefore, companied with the change of regulatory environment and the different earnings management ways managers used to weigh the costs and benefits, it's of great value to study the impact of analyst following on accrual and real earnings management in our own securities market.This paper is based on the sample of 9193 A-share listed companies over the 2004-2011 periods, through establishing simultaneous equations to test the endogenous problems between analyst following and accrual earnings management and real earning management. Moreover, the subsample regression results of suspected firms in accord with the full samples. Besides, combined with nature of the ultimate controller, we'll further examine the influence of analyst following on the choice of accrual earnings management and real earnings management. At last, by analyzing the empirical results, the conclusions are as follows:First, based on monitor effect, the more the number of analyst following, the less the real earnings management will be; Second, based on pressure effect, the more the number of analyst following, the more the accrual earnings management will be. Hence, the more the number of analyst following, managers in the listed companies choose to use accrual earnings management instead of real earnings management; Third, the more the number of analyst following, the less the whole earnings management will be. Fourth, compared to the state-owned holding company, the more the number of analyst following, managers in the non-state holding companies inhibit real earnings management more and take the place of accrual earnings management stronger.At last, the paper will put forward pertinent suggestions according to the conclusions. Improve the laws of analyst following and strengthen the supervision of government to analysts, which will play an indispensible role to make analyst monitoring more effectively, restrict earnings management and promote the capital market function well.