||Analyst coverage and earnings management:
Evidence from China
||Graduate Institute of Finance
Previous studies have documented security analysts’ potential role in corporate governance, specifically their influences on earnings management activities. However, most studies focus on the developed markets which usually have better information environment than the developing markets. This study examines security analysts’ role in public firms’ earnings management behavior in China, the world’s largest developing market. Using unsigned measurement of earnings management, I find that the more analyst coverage exists, the less overall tendency of earnings management firms have. Moreover, splitting the sample by managed earnings’ directions, I document that analysts in China stock market have higher curbing effectiveness of positive earnings management than that of negative earnings management. These results provide incremental evidence to what affect earnings management behavior of China’s public firms, and it strengthen our understanding towards the external governance role of analyst coverage.
摘 要 I
誌 謝 III
List of tables V
1. Introduction 1
2. Background and literature review 4
2.1 The role of financial analyst 4
2.2 Analyst and earnings management 5
2.3 Accruals and earnings management 6
2.4 Hypothesis 8
3 Data and methodology 9
3.1 Sample selection 9
3.2 Earnings management measurement 11
4 Research design and empirical findings 12
4.1 The effect of analyst coverage on earnings management 12
4.2 Robustness checks 14
4.3 Covered versus uncovered firms 15
5 Conclusions 16
Appendix- Estimation of discretionary accruals 18
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