Earnings management and analyst following: : A simultaneous equations analysis

• Autores: Yongtao Hong, Fariz Huseynov, Wei Zhang
• Localización: Financial management, ISSN 0046-3892, Vol. 43, Nº 2, 2014, págs. 355-390
• Idioma: inglés
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• Resumen

  • We use a simultaneous equations system to examine the relationship between earnings management and analyst following. We find that analysts ' decisions to follow firms and managerial decisions to manage earnings are jointly determined. Firms with lower levels of accrual-based earnings management offer a better information environment to attract analystfollowing. Analyst following, in turn, has important monitoring effects on managerial behavior and results in lower levels of both accrual-based and real earnings management. The information intermediary effect on analyst following is much weaker for expected "suspect firms " that manage their earnings continuously.