Earnings Management,Analysts And Investors’Heterogeneous Beliefs

Since the 1970 s,with the development of behavioral finance,behavioral finance theory based on heterogeneous beliefs has gradually formed.In recent years,the sharp rise and fall of China’s stock market shows that investors are generally irrational.Heterogeneous belief is an important feature of China’s capital market.Information is an important basis for investors to form value judgment.Under the impact of constantly updated information,investors also constantly update their expectations and modify their beliefs,which leads to stock price fluctuations.As an important information carrier,financial report is an important medium for investors to understand the listed companies.Its earnings information is useful for decision-making and is an important basis for investors to make decisions.The academic focus is on the relationship between investors’ heterogeneous beliefs and stock price and earnings during earnings announcement,but few literatures study the impact of earnings announcement information quality on investors’ heterogeneous beliefs.Based on the data of China’s A-share listed companies from 2006 to 2017,taking the actual disclosure date of the annual financial report as the event base date,this paper calculates the average over turnover rate from 0 to 3 days as the proxy index of investors’ heterogeneous beliefs,and studies the impact of earnings management on investors’ heterogeneous beliefs.The results show that both accrual earnings management and real earnings management can improve investors’ heterogeneous beliefs,and the conclusion of extending the window remains unchanged.Group test results show that only positive accruals and real earnings management can improve investors’ heterogeneous beliefs;only higher accruals and real earnings management can intensify investors’ heterogeneous beliefs;in view of the alternative benefits of the two earnings management behaviors,the research conclusion of constructing comprehensive earnings management indicators remains unchanged.In view of the economic consequences of earnings management,this paper further studies its governance mechanism.The results show that analysts are conducive to alleviate the impact of accrual earnings management on investors’ heterogeneous beliefs,but not the impact of real earnings management on investors’ heterogeneous beliefs.The conclusions of this study further support the importance of improving earnings quality,and help to fully understand and evaluate the governance role of analysts.