The Study Of Securities Analyst Coverage’s Impact On Enterprises’ Overinvestment

The effectiveness of resource allocation can greatly affect economic operation from a macro perspective and can determine the future development of an enterprise from a micro perspective.Investment is an important part of resource allocation.How to ensure the effectiveness of investment is one of the hot topics in theoretical research.In recent years,companies have blindly expanded their business scope for the purpose of expanding the scale of operations and enhancing market competitiveness,or because of the ambition of executives to build a business empire and grasp more economic resources,they have made investment decisions without considering whether investment net cash flow is positive or negative,which may result in overinvestment.In the theoretical world,there are countless studies on corporate governance of external supervision.As media and analysts play an important role in external governance,related research is naturally not infrequent.However,after reviewing the research,it is found that the research on securities analysts and over-investment is still rare,and the research conclusions are also different.Some opinions suggest that securities analysts have played the role of information intermediary and external supervision,which inhibited the over-investment behavior of enterprises.Other opinions held the opposite view,noting that analyst coverage did not inhibit over-investment,but also promoted over-investment.But it did not explain the reason,nor did it explain the influence mechanism.Given that the previous studies are opposite and the impact mechanism is unknown,it is still unknown whether the external role of the securities analyst is effective for the company’s investment efficiency.This article explores the level of corporate over-investment from the external influence factor ofthe analyst report,and expands the influence factors of over-investment and the research of securities analysts on corporate governance.In addition,by digging out the influencing mechanism among them,the variables of corporate financing constraints are linked to the variables of securities analysts coverage and overinvestment to examine their effects on overinvestment.In theoretical research,this article enriches related research.In practice,this article not only has important implications for companies to standardize the use of financing funds and improve investment efficiency,but also has important implications for prompting securities analysts to strengthen information collection and supervision in corporate investment and financing.In this paper,securities analysts,as the role of information intermediary,supervisor and presser,is investigated for its effect on overinvestment in enterprises.According to the number of securities analysts coverage,the nature of enterprises and the status of enterprises’ capital,it is tested whether the heterogeneity of enterprises will affect this relationship.Also,this article uses the intermediary effect model to further explore the transmission mechanism from the perspective of financing constraints.Finally,it draws the following conclusions:(1)Securities analyst coverage has a significantly positive correlation with corporate over-investment.Securities analysts put pressure on companies by issuing performance forecasts.Once the company fails to meet the analyst’s forecast goals,stock prices will fluctuate,affecting the interests of the company and managers.For the sake of their own interests and reputation,the management will also minimize the difference between the actual performance and the anticipated performance of the analyst.Given that investment can effectively increase output,managers will increase investment to increase the company’s earnings.Such an investment strategy that does not consider the actual operating conditions of the company may lead to excessive investment.(2)After dividing the company according to whether it is a state-owned enterprise,the number of securities analysts,the level ofcash flow and financing constraints,the sub-samples were re-regressed.It was found that the relationship between securities analysts and over-investment did not change due to the differences between the enterprises.And in the group of more analysts tracking,the nature of state-owned enterprises,and more convenient financing,the effect of securities analyst tracking to promote corporate overinvestment is also greater.(3)Empirical finds that securities analysts influence corporate over-investment through the mediating variable of financing constraints.Analysts have eased corporate financing constraints,which provide sufficient funding for corporate investment,ultimately leading to over-investment.