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Analyst coverage, earnings management and financial development: An international study

Author

Listed:
  • Hervé Stolowy

    (GREGH - Groupement de Recherche et d'Etudes en Gestion à HEC - HEC Paris - Ecole des Hautes Etudes Commerciales - CNRS - Centre National de la Recherche Scientifique)

  • Yuan Ding

    (CEIBS - China Europe International Business School)

  • Thomas Jeanjean

    (ESSEC Business School)

  • François Degeorge

    (Swiss Finance Institute [Geneva] - Swiss Finance Institute)

Abstract

Using data from 21 countries, this paper analyzes the relation among analyst coverage, earnings management and financial development in an international context. We document that the effectiveness of financial analysts as monitors increases with a country's financial development (FD). We find that in high-FD countries, increased within-firm analyst coverage results in less earnings management. Such is not the case in low-FD countries. Our results are economically significant and robust to reverse causality checks. Our findings illustrate one mechanism through which financial development mitigates the cost of monitoring firms and curbs earnings management.

Suggested Citation

  • Hervé Stolowy & Yuan Ding & Thomas Jeanjean & François Degeorge, 2012. "Analyst coverage, earnings management and financial development: An international study," Post-Print hal-00765628, HAL.
    • Handle: RePEc:hal:journl:hal-00765628
    DOI: 10.1016/j.jaccpubpol.2012.10.003
    as

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