Analyst’s Behavior、Readability Of Annual Report And Enterprise’s Tax Burden

One hot issue that has long puzzled researchers of China’s capital market is whether or not sell-side financial analysts play an effective and important role in corporate information interpretation.By applying a complexity/readability measure of Chinese annual reports, this study provides the first solid empirical evidence to support the analysis of this problem. Our findings include the following: 1) Analysts following is significantly positively related to the complexity of annual reports. This implies that analysts actively follow the corporations with more complex reports, and therefore contribute to the disclosure of corporation information; 2) The more complex the annual reports, the stronger the positive correlation between the complexity of annual reports and analyst following. However, there is no significantly positive correlation between annual report complexity and the informativeness of analyst reports, which indicates that analysts fail to interpret disclosure information effectively; 3) Annual reports complexity is not significantly related to analyst prediction quality. Meanwhile, when we control annual readability,the overall tax burden of enterprises have significant positive correlation on analysts’ behavior. Whereby we can confirm again that analysts have limited contribution to the interpretation of disclosure information,the motivation of analysts following mainly originates from overconfidence. The above conclusions have been robustly tested with systematic experimentation.