Analyst Coverage And Earnings Management

The separation of ownership and management rights leads to information asymmetry,which gives the management of the company the opportunity to use its own power to get more benefits.That will damage the interests of investors.In China,this problem is more seriously.If the manager uses their power to get more benefits without considering other people's interests,the investors and the capital market will have a large negative effect.As an outsider of the company,the analyst provides investors with objective information help them make decision.Therefore,the investors rely heavily on analysts.In recent years,the analyst industry has grown rapidly,and the governance role of analysts has got more and more attention,and has become an important part of the external governance structure of companies.Therefore,it is important to discuss the external governance mechanism of analysts,and to supervise the analyst industry more effectively,provide policy suggestions for the regulatory authorities.It has great significance to the healthy development of companies and capital markets.This paper based on China's A-share listed companies from 2008 to 2017.Based on multivariate linear regression analysis,this paper have drawn the following conclusions:(1)Analysts coverage is negatively related to the degree of accrued earnings management,and positively related to the company's real earnings management activities;(2)The star analysts make the relationship between analysts coverage and earning management more stronger;(3)Analyst coverage is more negatively related with accrual earning management and less positively related with real earning management when company's internal control is better.Based on the above research,this paper gives the following suggestions:(1)Analysts,especially star analysts and investors,should improve their professional skills.And keep their eyes on firm's real earning management related activities.(2)the manager should aware the harm of earnings management to the long-term development of the company,and strengthen then internal control system.(3)Regulators should actively guide analysts to participate in corporate governance and improve policies of internal control and earning management.