An Research On The Relationship Between Analyst Following And Securities Liquidity

Liquidity is one of the core issues of the financial market microstructure, as well as one of important measurements of securities market performing effectiveness. A securities market with favorable liquidity not only offers investors large opportunities for transactions as costless as possible, but also firms the necessary provisions for fundraisers towards reaching financing target when meeting such requirements as profitability and risk-off for investors. The securities market will lose its necessaries for existence, securities transactions unable to complete, securities issuing obstructed if the market lose liquidity.The stock market in China, set up in the90s of last century, has become one of significant part of national economy and people’s life after nearly twenty year of development, and plays an irreplaceable role in propelling economic structure adjustment, improving Modern Corporation System and so on. However, the stock market deviates a lot in its functional localization, over stresses the function of financing, while overlooks the function of investment and the function of perfecting resources distributing. Which results to the poor performance of listed company even performance fraud, such serious deregulations in market as price-earnings ratio unseasonable large, stock investment de-return, stock price manipulated by banker, short-term speculation by investors.The role of securities analyst manifests itself with the capital market trending to function well. In one hand, as the information users, they analyze and forecast listed corporations’ operation activities by information form public and personal channels, evaluate expected return and risk; in another hand, as the information suppliers, securities analysts, they transmit information which they conclude form analysis to investors for reference when investing decisions. The information median played by securities analysts improve the liquidity of information, and propel the operation effectiveness, thus driving up securities liquidity. For a newly-rising market like China, the mechanism of market function is under developing, large amounts f investors while among of whom individual investors takes a great part as the disadvantaged side with inefficient analysis skills. Therefore, the development of securities analysts industry seems very important for the further development of capital market in China.Securities analysts affect liquidity by two perspectives that are direct effect and indirect effect. Direct effect is when securities analysts release their earing forecast reports, investment advice and stock ranking etc. about their covering companies; they can influence capital market or information market directly, and their efforts can be the direct reference for investing decision, therefore, the direct effect on liquidity can be easily found by market investors; while the indirect effect, which is analysts compel listed companies to improve their disclosure policies by external supervisions and information competition, which is indirect. Securities analysts have to maintain a kind of relationship with listed companies like cooperation and supervision in order to acquire their target companies’ such information as working situation and risk etc., securities analysts, one of the external supervision institutes, utilize their specialized knowledge and working experience to identify and evaluate the public disclosure by listed companies along with cooperating with listed companies; although as the main information releaser in the capital market, listed companies are confronted with the competition to some degree with securities analysts for who have also undertake a part of task in information release. Although the theoretical circle believe that securities analysts have a positive influence in liquidity, the research about securities analysts initiate very late, added by the data limitation, there exist few researches whose results are not the same about the indirect effect of securities analysts on the liquidity. Along with the rapid growth of securities analysts in China in recent years, the issue of the relationship between securities analysts and liquidity has developed the hot topic of the domestic researches.Based on analysis above, this paper checks the relationship among analysts, disclosure and liquidity along with relevant institutional background and current research situation with the expectation of offering some reference to further developing and perfecting securities analysts’circles, disclosure policies and even capital market. According to such idea, the paper can be divided into six parts as follow:Introduction is mainly about the research background and significance, research idea and its methods, and the basic framework. The first chapter reviews relevant researches about the relationship among securities analysts, disclosure and liquidity through systematic review toward the current researches which concludes the main direction of current research and its deficiency, based on which the paper put forward some idea for further research, which forms the elemental framework of this paper. The second chapter describes the theoretical ground about the relationship among securities analysts, disclosure and liquidity. This chapter elaborates the rationality and the inevitability of securities analysts from such three different theories as Information Asymmetry, Signal Transition and Hypothesis of Limited Rationality of Economic Man, which reflects that the low liquidity is result by information asymmetry, in order to improve liquidity and realize the target of optionalizing resources distributing, information asymmetry between listed companies and investors should be released through adding accessible information and improving the quality of disclosure. The role of analysts releasing information in capital market and compelling listed companies to upgrade its disclosure supports the fact that analysts work positively on liquidity both directly and indirectly in theory. The third chapter analyzes the concrete relations among analysts, disclosure and liquidity, and based on which the paper rises the hyposis. The forth part is the core of the paper, about the empirical analysis of the analysts toward liquidity. The author constructs different models toward each hyposis, and get the data about disclosure from Shenzhen Stock Exchange, selecting sample listed in Shenzhen Security Exchange from the year of2007to the year of2012.The empirical test includes descriptive statistics, correlation analysis, regression results and analysis, further test and sensivity test. The paper utilizes chart and data describing the development trend of analysts, disclosure and liquidity, and 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 further discussing the regression result, the paper also design a further test and sensitivity test. The fifth part combines previous literature and empirical test result and draws a conclusion, and then points out the deficiency and the direction of a further research, the paper ends up with some policies suggestion about perfecting disclosure mechanism and securities analysts’ circles enlargement.