Restricted Shares Decreasing,Securities Analysts' Earnings Forecasts And Earnings Management

Recently,China securities regulatory commission has issued several announcements about reducing holdings of major shareholders to normalize the behavior of major shareholders' stocks sale.Because of its particularity,the sale of restricted stocks attracts more attention of stakeholders.The most of restricted shares due to share reform have unlocked,and other restricted shares have developed rapidly,so the pressure from sale of non-tradable stocks is much higher.The shareholders always desire to obtain higher profit when they sale the non-tradable stocks,then their desire and ability make the listed companies manage earnings.In China,compared to listed companies,investors just can collect quite limited information.It is difficult for investors to get extra profit by themselves.Securities analysts exactly help investors cover information shortage.So securities analysts are trusted by investors because of their profession and capacity,and then affect the behavior of listed companies.Actually,securities analysts' earnings forecasts have a dual function of induction and inhibition to earnings management of listed companies.On the one hand,securities analysts'earnings forecasts can represent the market's expectation.If not meet the expectation,the listed companies may face terrible situations of stocks price falling and investors abandoning stocks,so they in crisis have to adjust earnings to meet analysts' earnings forecasts.This paper says that securities analysts' forecasts induce the earnings management of listed companies.On the other hand,securities analysts are independent of investors and listed companies,therefore they can make relatively objective and accurate earnings forecasts to inhibit the earnings management of listed companies,and make the listed companies provide more reliable earnings report.Under lacking of perfect securities market supervision mechanism,it is worthwhile to explore which kind of securities analysts' earnings forecasts' effect is more significant in our country.On the basis,what effect securities analysts' forecasts have on the earnings management of the listed companies before non-tradable shareholders sell the restricted stocks?Therefore,this paper chooses all listed companies in which non-tradable shareholders have sold restricted stocks in the A share market during year 2011 to 2015 as research object to study the relationship among restricted shares decreasing,securities analysts' earnings forecasts and earnings management.At first,this paper examines whether the listed companies are inclined to earnings management before non-tradable shareholders sell restricted stocks,and restricted stocks reduction scale is measured by restricted stocks reduction quantity ratio and its market value ratio,then test the correlations between two ratios and the degree of earnings management.Then add securities analysts' earnings management as a regulating variable to the first examination to inspect inhibition or induction effect securities analysts' forecasts have on earnings management,and measure securities analysts' tracking and the quality of securities analysts' forecasts with appropriate indexes,further study that their effect on earnings management in the process of restricted stocks reduction.This paper hopes the above studies to enrich the related research.Through empirical test,this paper gets some results.In order to cooperate with reduction behavior of non-tradable shareholders,the listed companies are inclined to adjusting earnings.As the reduction scale of restricted stocks measured by restricted stocks reduction quantity ratio and market value ratio is larger,listed companies suffer more press before restricted stockholders sale stocks,the degree of earnings management by listed companies is deeper.To a certain extent,securities analysts can make up the weakness of government regulation.The popularity of securities analysts'forecasts can effectively restrain earnings management by the listed companies.Before non-tradable shareholders sell restricted stocks,securities analysts' tracking mainly have inhibition effect on earnings management through controlling production,while the listed companies also conduct reverse adjustment through manipulating expense.Before non-tradable shareholders sell restricted stocks,the quality of securities analysts' forecasts is positive to the degree of earnings management by listed companies in the relatively lower error range and lower variation range.This shows that securities analysts can play an alternative role of supervision and inhibit the behavior of earnings management by listed companies when the quality of analysts'forecasts is good.After controlling the endogenous problem between securities analysts' forecasts and earnings management,the empirical results are still reliable.Under the background of social and economic developing rapidly in China,it is very imperative to improve and update policies and systems in all aspects.This paper on the relationships among restricted shares decreasing,securities analysts' earnings forecasts and earnings management provides reference and enlightenment for increasing the quality of information disclosure,strengthening the construction of securities analyst talents team,improving the supervision mechanism of securities market and so on.