Analyst Earnings Forecasts And Earnings Quality

In the enormous enterprise accounting information systems, accounting earnings,as one of the most direct indicator of the operating results during a period of time, have been widely recognized for their large information content. No matter investors or regulators, dependence on indicators of earnings is much stronger than other comprehensive index, which determines that the earnings quality has a high practical significance. What’s more, the importance of analyst earnings forecasts also has an apparent steady development in China’s capital market increasingly, on one hand, it is a communication bridge for listed companies and both internal and external financial information users; on the other hand, it is playing an important role of external supervisor in corporate governance. Therefore, on the perspective of external pressure on profits, whether the research analyst earnings forecasts will affect the earnings quality of listed companies has a very important theoretical and practical significance.This thesis aims to work out whether the external profit pressure that differences between analyst earnings forecasts of EPS and that of the enterprise potential will make corporate management manipulate earnings generated or actual operations to meet the profit forecast of the analysts, which will result in lower earnings quality. Additionally,the thesis will also study whether the external oversight power developed by the attention of the analysts during this process will regulate this relationship.Firstly, the thesis conducts a literature review on analyst earnings forecasts and earnings quality and their relationships, then an internal mechanism analysis is made in terms of formation of external earnings pressure, earnings quality and the positive, the negative impact of earnings quality analyst, afterwards in the empirical part, this thesis selects Shanghai A-share listed companies as research samples from 2010 to 2014. The result of my study is, first, relationship between the external profit pressure and corporate earnings quality formed by the analysts’ earnings forecasts and expectations of the management was a negative correlation. That is, compared to management expectations, the higher the expectations of external operating profit, the greater the pressure, the higher possibility for management to manipulate earnings, the lower the earnings quality is. Second, for enterprises where analysts’ expectation is higher than the internal management expectation, thus relationship was stronger than that the analysts’ expectation is lower than the internal management expectation. That is, when the analyst expectation is higher, the enterprises are more likely to be affected by external profit pressure, and then they will adjust the actual surplus by all means. Third,the external profit pressure for negative regulation of analysts’ attention and corporate earnings quality is negative correlation. Finally, this paper summarizes the main conclusions, and give suggestions from the construction of high-quality analysts team,strengthen government and social supervision, Optimize internal governance structure of the enterprises, improve accounting policies for memory investors for rational investment, and it also analyzes the limitations exist of the study.Contribution of this thesis may lie: a new perspective is chosen, on the basis of analyst earnings forecasts, external pressure on profits is incorporated in earnings quality research framework, it also investigates the relationship between analysts earnings forecasts and corporate earnings quality under the pressure of internal and external operating profit expectation gap. In the respect of measurement, the thesis raises the analyst earnings forecasts for corporate earnings to external profit pressure.Based on the difficulty of external earnings pressure, few studies abroad was given to define and measure, let alone domestically. Therefore, this thesis may enrich the content of external earnings pressure, particularly in the application of external pressure on the profitability of the capital market of our country; I hope it can help to fill vacancies in this part.