An Empirical Study On Analyst Coverage And Stock Price Crash Risk

As a professional information interpreter,security analysts are the important information intermediary and external supervision mechanism in the capital market.However,the systematic optimistic forecast among securities analysts may worsen the information environment of the market.The development of securities market in China is not perfect,it is not clear whether securities analysts can effectively play a role which reduce the risk of stock price crash.On the concern of this problem,this paper discusses the role of security analysts in China capital market on the perspective of analyst coverage.Using the sample from 2006 to 2016 in China A-share listed companies,I use the tracking by security analyst for individual stocks to measure the analyst coverage to study the relationship between analyst coverage and crash risk and their impact mechanism.The main conclusions of this paper: 1)analyst coverage is positively correlated with the crash risk;2)identifying the impact,I find that security analyst mainly increase the risk of crash by ingratiatory mechanism,which means that analysts’ ingratiatory behavior which lead to optimistic forecasts exacerbate the accumulation of "bad news" in the stock market,and eventually increase the crash risk.There is no evidence that security analysts increase the risk of crash by pressure mechanisms.This paper extends the relevant research of securities analysts and provides empirical evidence for regulating the behavior of securities analysts.