The Influence Of Margin Trading System On Securities Analysts' Recommendation Behavior

The capital market is to a large extent an information-driven market,and analysts play an important role as an information intermediary,but before the margin financing and securities lending system has not been launched,short selling cannot bring analysts commissions,which makes analysts generally optimistic and difficult to objectively play the role of information intermediary.After the introduction of China's margin financing and securities lending system in March 2010,the analyst's interest function has changed.Due to the high cost of margin financing and securities lending(average of 8.35%),the brokerage company's income from each transaction of financing and securities lending will be much higher than the benefits that ordinary stock exchanges can bring,and analysts can get more commissions from margin financing and securities lending business,which may make them more willing to disclose neutral or even negative rather than generally optimistic recommendation ratings.In view of this,this paper uses a combination of theoretical analysis and empirical analysis,based on the summary of the relevant documents on margin trading and short selling and related behaviors of the analyst's behavior,based on the proposed question to make reasonable assumptions.In March 2010,the A-share market officially launched the financing and securities lending business,which helped us form a natural experiment Eligible data from the stock market from December 2006 to December 2019 were selected for testing.As for the test method,the characteristics of increasing the volume of margin lending and short selling in batches make the processing time of each subject different,while the traditional difference in difference method(DID)assumes that all the individuals in the treatment group start to be impacted by the policy exactly at the same time,so this paper uses multi-time-point difference in difference method(multi-time DID)to study the impact of margin trading system on the stock recommendation behavior of analysts as information intermediaries.This article first studies the impact of margin financing and securities lending on analysts' stock recommendation behavior.The results show that(1)the introduction of the margin financing and securities lending system significantly reduces the analyst's recommendation stock rating and increases the forecast bias of the analyst's recommendation stock rating;Different from the short-selling system abroad,China's margin financing and securities lending system includes both financing and securities lending.When analyzing the impact of two different businesses on the behavior of analysts recommending stocks,it is found that(2)it is the margin trading rather than the securities lending that lowered the analyst's recommended stock rating and increased the analyst's recommended stock rating bias.(3)At the same time,the margin financing and securities lending will increase the analyst's tracking,the margin trading whose transaction scale accounts for the absolute share of margin trading and securities lending will attract more analysts to follow.As the information contained in the analyst's recommended stock rating and the profit forecast are not consistent,in order to further study the analyst's recommended stock behavior,this paper makes a comparative analysis on analysts'recommendation and earnings forecast behavior by the effect of margin financing and securities lending.The research results show that the effect of margin financing and securities lending on analysts' recommendation behavior and profit forecast behavior is not consistent.(4)Margin financing and securities lending will significantly low the analyst's recommended stock rating,but it will significantly increase the analyst's profit forecast and profit forecast optimism.This article further researches the mechanism of tracking stock quantity and forecasting interval that affects analysts 'stock recommendation behavior by margin financing and margin trading.The research results show that(5)margin financing will significantly lower the recommendation rating issued by analysts with fewer tracking stocks.Due to the limited energy of analysts,if the analysts track the number of stocks less,they will have more energy to analyze the target,mine more information(including negative information),and are more likely to give objective ratings.(6)On the other hand,margin financing will significantly lower the recommendation ratings of analysts with shorter forecast intervals issued by analysts.The analyst recommendation rating with a shorter forecast interval represents short-term analyst recommendation behavior.It shows that margin financing mainly affects analysts' short-term recommendation rating behavior.In order to test the robustness of the results,this paper carried out a robustness test at three levels.First,the control group samples were re-selected using the propensity score matching method PSM,and tested using the same model.Secondly,different batches of margin financing and securities lending targets are tested in batches.In addition,because the experimental data in this article is long to some extent,the sample inspection interval is shortened for testing.The test results at three levels have confirmed the robustness of the experimental results.Finally,this article summarizes and analyzes the overall empirical results,and puts forward the following suggestions based on the current development situation and actual situation of China's margin financing and securities lending:(1)Securities market policy makers can further expand the margin financing and securities lending target company in a timely manner according to market development conditions;(2)At the same time,because the margin trading business is too small and the financing business accounts for an absolute proportion,the role of the short-selling system is limited due to its scale,so the development of the margin trading business can be appropriately accelerated.(3)Since the conflict of interest between analysts and investors is the fundamental reason for them to release excessive optimistic rather than objective and fair forecasts,policy makers can formulate and further improve the mechanism to prevent analysts' conflicts of interest and enhance the independence and objectivity of analysts.