Empirical Testing Of Relationship Between Accounting Information Transparency And Forecast Of Financial Analysts

With the development of capital market, the role that financial analysts take part in is more and more important. On one hand, financial analysts act as information users, analyzing operating activities of public companies using a variety of information they acquire, evaluating expected earning and risk profile. On the other hand, financial analysts act as information providers, providing investors with information which has been disposed for their investment decisions. Financial analysts' role as an intermediary is really great useful for the flow of information, also for the improvement of operating efficiency of securities market. Especially in China which is an emerging capital market, the operation mechanism of the market is in development stage that still needs to be rapidly improved. There are numbers of investors who are often in the dry tree because of lacking professional analytical skills. Consequently, the industry of financial analyst is rather significant for the development of capital market in China.The information financial analysts collect and use when they make earnings forecast for listed companies includes two types. One is released by listed companies to disclose information, known as public information; the other is received through other channels, as private information. Given private information is more difficult to be received than public information, with also higher cost, financial analysts more often rely on pubic information in practice. However, listed companies are the source of the information. Then the relationship between information disclosure of listed companies and earnings forecast of financial analysts has been a question. Although it is commonly agreed in theory that transparency accounting information transparency of listed companies has a positive impact on the financial analysts' earnings forecast, the empirical study in China is still in egg because the start of analyst industry is much later than foreign countries and the data for empirical study is really limited, and the empirical results are not the same. With the rapid development of the financial analysts industry in China for recent years, the study about the relationship between accounting information transparency and earnings forecast of financial analysts has become hot.Based on the above analysis, we combine the relevant background and recent development in our country with the following empirical analysis on the relationship between accounting information transparency and forecast of financial analysts, hoping that the empirical conclusions will be useful for the improvement of information disclosure system and industry of financial analysts in China. According to this idea, the paper is divided into six parts:The introduction part introduces the background and significance of the research, the ideas, methods and the basic framework of the paper. The first chapter reviews the related literature on accounting information transparency and financial analysts forecast in detail, sorting the existing literature on domestic and overseas, summing up the general trend of current research and deficiencies at present, and then determine the basic idea of the paper. In the second chapter, the author introduces the theoretical basis of accounting information transparency and analyst forecast. Firstly, the chapter analyses the rationality and necessity of the existence of financial analysts industry from the perspective of hypothesis of limited rationality of economic man. What's more, viewing the information perspective as a starting point, we outline two forms of information asymmetry, namely adverse selection and moral hazard. Low level transparency of accounting information will result in information asymmetry of the capital market. It is necessary to improve accounting information transparency of listed companies to reduce the information asymmetry, so that it can be helpful for resource distribution. As the level of transparency increases, financial analysts will receive the public information with high quality more easily. In theory, higher level transparency has a positive effect on the analyst forecast. In the following chapter, the author analyzes the impact which transparency makes on analyst forecasts, and we discuss the impact from three aspects, including the accuracy of analyst earnings forecast, the differences of earnings forecast among financial analysts and the number of analysts following. Based on the theory discussed before, the author proposes hypothesizes. Chapter IV should be the core of the paper. That's the empirical analysis on the impact of accounting information transparency makes on analysts forecast. In view of those hypothesizes proposed in chapter 3, we construct three models for the relationships. The author improves the computational method of the accuracy of analyst earnings forecast, and measures transparency with the disclosure score declared by Shenzhen Stock Exchange, and then selects the companies listed in Shenzhen Stock Exchange from 2001 to 2008 as the primary sample of empirical analysis, specifically including descriptive statistics, correlation analysis, regression analysis and further empirical testing. It describes the development trend of financial analysts industry in China and the situation of information disclosure of public companies listed on Shenzhen Stock Exchange, using several charts and data. We get the preliminary results through the correlation analysis between the independent variables and the dependent variable, and then make regression analysis on the data of each sample separately. In order to explore the reasons for the regression results further, the paper also designs the further test. Chapter V combines theory and empirical results earlier. It summarizes the main conclusions of the study, and points out the deficiencies that remain and some directions of further research. Finally, the author gives several suggestions on improving the information disclosure system and promoting the financial analysts industry.