Research On The Impact Of Analyst Tracking On Related Party Transactions

Our country is in the crucial period of economic system reform.Slowing economic growth,high local debt and accumulation of financial risks make our enterprises face complex economic environment.The controllers of listed companies have strong motivation to whitewash financial statements,manipulate profits and "tunneling" listed companies through related party transactions.According to the data of the Securities Regulatory Commission,as of the end of November 2018,56 enterprises had been denied IPOs,involving 38 related parties and related party transactions,accounting for about 68%.At present,the problem of related parties in Listed Companies in China is still prominent,and there are still some deficiencies in the supervision of related party transactions by regulators.In China’s current regulatory system,in addition to CPAs,government regulation and market regulation,there are also a group of securities analysts who have the ability of information mining,financial analysis and information transmission.Securities analysts use their own expertise to mine and analyze corporate information,timely transfer it to external capital markets in the form of reports,improve the transparency of information in internal and external capital markets,alleviate the degree of information asymmetry,reduce the cost of principal-agent,and then improve the corporate governance environment and restrain unfair related party transactions.Furthermore,China’s market environment is complex and changeable.Different enterprises are facing different internal and external capital market environment(internal control and financing constraints).Securities analysts may have different impacts on related party transactions under different internal control and financing constraints.Therefore,this paper mainly studies the following questions:(1)How does analyst tracking affect the related party transactions of companies in China?(2)Under different internal control and financing constraints,is there any difference in the impact of analyst tracking on related party transactions of listed companies?Firstly,this paper introduces the research background and significance,on this basis,combs and summarizes the relevant research data at home and abroad,defines the concepts of analyst tracking,related party transactions,internal control and financing constraints,and expounds the theoretical basis of this study.Then,based on the basic theory,the empirical hypothesis of this paper is put forward:(1)Analyst tracking is presented for the related party transactions of enterprises.Current restraint;(2)Compared with companies with perfect internal control,the restraint of analyst tracking on affiliated party transactions is more significant in companies with defective internal control;(3)Compared with companies with weak financing constraints,the restraint of analyst tracking on affiliated party transactions is more significant in companies with strong financing constraints.In order to test the hypothesis,this paper selects the data of A-share non-financial listed companies in Shanghai and Shenzhen Stock Exchanges from 2013 to 2017,constructs the regression model of analyst tracking and related party transactions based on the research of scholars,and uses stata14.0 software to empirically analyze the relationship between analyst tracking and related party transactions,and the changes of the relationship between analyst tracking and related party transactions under different internal control and financing constraints.The results show that:(1)under the control of other variables,analyst tracking can effectively inhibit related party transactions;(2)compared with enterprises with effective internal control,analyst tracking has stronger inhibition on related party transactions in enterprises with defective internal control;(3)the higher the degree of financing constraints,the more significant the inhibitory effect of analyst tracking on related party transactions.Furthermore,the robustness test of instrumental variables and proxy variables substitution shows that the test results are consistent with the empirical results,which provides more incremental evidence for the conclusions of this study.Finally,based on the empirical results,the following policy recommendations areput forward:(1)improve and perfect the external supervision mechanism of securities analysts;(2)improve the disclosure system of related party transactions;(3)improve the internal control system of listed companies;(4)strengthen the information disclosure of capital market to reduce information asymmetry.