Will The Quality Of Internal Control Of Listed Firms Affect The Accuracy Of Analysts’ Forecasts

As an important part of the capital market,securities analysts receive information,interpret information,provide investment advice to investors,guide the orderly flow of funds and promote the optimal allocation of resources.Therefore,the improvement of analysts’ prediction accuracy is of great significance to the healthy development of the capital market.Since the Sarbanes-Oxley Act enacted by the United States came out in 2003,the quality of internal control of listed companies has gradually received the attention of national regulators.The quality of the internal control of an enterprise affects the efficiency of its internal operation and the quality of its external information disclosure.As the receiver of information,the quality of the information received by the analyst affects the accuracy of its prediction.The existing literature mainly studies the impact of the quality of internal control of listed companies on corporate governance.Few scholars have studied the specific internal relationship between it and the accuracy of securities analysts.Therefore,based on the perspective of information disclosure,this paper studies the impact of the quality of internal control of listed companies on the accuracy of analysts’ forecasts and its impact mechanism,which is conducive to clarifying the internal relationship between the quality of internal control of enterprises and the analysis and prediction,improving the accuracy of analysts’ forecasts,and promoting the common healthy development of enterprises and analysts.On the basis of previous literature,this paper measures the quality of internal control of enterprises with the internal control index of listed companies in China.First,it explores the impact of the quality of internal control of listed companies on the accuracy of analysts’ forecasts through empirical models.Secondly,combined with relevant literature,verify whether the quality of internal control of listed companies indirectly affects the accuracy of analysts’ forecasts by affecting the quality of information disclosure.Then,based on the analyst information sources,the analyst information sources are divided into public information and private information,and the impact of internal control quality on the accuracy of the two sources of information is studied.At the same time,this paper tests the robustness of the main empirical results by using the instrumental variable method,replacing the explanatory variable with the accuracy of the analyst’s prediction with a lag of one period,replacing the explanatory variable with the internal control defect,and the propensity matching score method.In the expansion analysis,this paper adds the interaction between internal control quality and external audit quality to the basic model,and analyzes the moderating effect of external audit quality between internal control quality and analyst prediction accuracy.Finally,this paper studies whether there is heterogeneity in the impact of internal control quality on the prediction accuracy of star analysts and non-star analysts.The research of this paper shows that:(1)The quality of internal control of listed companies has a significant positive impact on the accuracy of analysts’ forecasts.Specifically,the higher the quality of internal control of listed companies,the higher the accuracy of analysts’ forecasts.(2)The quality of internal control of listed companies indirectly affects the accuracy of analysts’ forecasts by influencing the quality of information disclosure,that is,the higher the quality of internal control,the higher the quality of information disclosure and the higher the accuracy of analysts’ forecasts.(3)The higher the quality of internal control of listed companies,the higher the accuracy of analysts’ public information and the lower the accuracy of private information.(4)The improvement of external audit quality will weaken the impact of internal control quality on the accuracy of analysts’ forecasts.(5)Compared with star analysts,the prediction accuracy of non-star analysts is more affected by the quality of internal control.Finally,this paper puts forward some suggestions from the perspectives of listed companies,regulators,securities analysts,investors and other participants in the capital market.The possible innovations of this paper are mainly reflected in two aspects:first,the innovation of research content.This paper not only links the quality of internal control of listed companies with the earnings forecast of analysts,but also analyzes the impact mechanism and the regulatory role of external audit quality,and studies from the perspective of analyst heterogeneity.The research content is more comprehensive.The second is the innovation of research perspective.From the perspective of information disclosure,this paper considers the transmission effect of the quality of internal control on the accuracy of analysts’ prediction from the perspective of information disclosure quality,and studies the impact of the quality of internal control of listed companies on the accuracy of analysts’ public information and private information from the perspective of information sources.The perspective is more novel.