Study On The Following Behaviour Of The Listed Firms' Earnings Management

In imcomplete capital market,there exists information asymmetry,which is aggravated by listed companies' earnings management.Securities analysts,who get the professional analytical skills and comprehensive information resources,provide market investors' decisions with important information and evidence.Look through relative studies,analysts' forecast's accuracy has been proved,and their earnings forecast has been an important proxy to measure market anticipation.Analysts' earnings forecast somehow relieves the asymmetry between managers and outside investors.From the opposite,studies demonstrates that managers also use earnings management to meet the line of analysts' earnings forecast,by which they may get positive market reaction and more professional interests.According to Prospect Theory,the reason why market participators take analysts' forecast seriously and meanwhile,analysts' forecast become an important threshold managers avoid to miss,is caused by Reference-dependence.It indicates that analysts' forecast,in fact,is not necessarily treated as an absolute number.Quite a lot studies manifest that the performance of relative companies or companies in the same industry can influence market's anticipation(to the company)and also dramatically change managers' information reporting behaviour.Especially,Bratten et al.(2016)made the point that the reported performance of the leader(evaluated by the measure of meeting or missing analysts' forecast)in industry will significantly effects other firms' discretionary earnings management.In this study,we use the data in Chinese A shares from 2012 to 2016 examine whether the reported performance of one firm affects the discretionary reporting behavior of another firm.We do this by identifying the “Leader” within each industry,defined as the first large firm announcing the annual report.We also identify the “Follower”,defined as the firm that announcing at least 5 days after the “Leader”.This study find that,when leaders meet or beat the analysts' forecast,followers report more discretionary accruals,and are more likely to meet the analysts' forecast.Compare to Chinese state-owned firms,private firms' discretionary reporting behaviour are more sensitive to the leaders' performance.Furthermore,market concentration can effect followers' motive to change their discretionary management.