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Can financial analysts constrain real earnings management in emerging markets? Evidence from China

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  • Su Li
  • Fangfei Ding
  • Qianqian Liu
  • Ziwei Qiao
  • Zhiyu Chen

Abstract

We examine the effect of financial analysts on real earnings management in China. Our empirical results show a negative relationship between analyst coverage and real earnings management. This relationship exists within the full sample and sub-sample of firms meeting or beating earnings benchmarks. It survives tests to address endogeneity problems. We also find that real earnings management can impair companies’ profitability and analysts will revise their earnings forecasts downward for firms with aggressive real earnings management. Further research suggests that analysts can also curb accrual earnings management.

Suggested Citation

  • Su Li & Fangfei Ding & Qianqian Liu & Ziwei Qiao & Zhiyu Chen, 2022. "Can financial analysts constrain real earnings management in emerging markets? Evidence from China," Asia-Pacific Journal of Accounting & Economics, Taylor & Francis Journals, vol. 29(5), pages 1208-1226, September.
    • Handle: RePEc:taf:raaexx:v:29:y:2022:i:5:p:1208-1226
    DOI: 10.1080/16081625.2020.1871043
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