Analyst Coverage and Earnings Management: Evidence from China

Abstract

Besides information function, security analysts may play external supervision role in corporate governance which has been verified in developed market. Whether it is popular in China is unresolved. Nowadays, security analysts have become more and more important as intermediary in Chinese flourishing capital market. This paper study the relationship of analyst coverage and earnings management, trying to find direct evidence that security analysts’ coverage have restraint effect on managers’ earnings management decisions. The empirical result supports the opinion, and this paper contributes to the corporation governance theory and application.