Download This PaperAnalyst Coverage, Earnings Management and Financial Development: An International Study
50 Pages Posted: 31 Mar 2012
Date Written: March 31, 2012
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.
Keywords: analyst coverage, earnings management, financial development, international comparison
JEL Classification: G3
Suggested Citation: Suggested Citation
Swiss Finance Institute
c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland
European Corporate Governance Institute (ECGI)
c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium
ESSEC Business School ( email )
Accounting and Management Control Department
Avenue Bernard Hirsch
BP 105 Cergy Cedex, 95021
France
Hervé Stolowy
HEC Paris - Accounting and Management Control Department ( email )
Jouy-en-Josas Cedex
France
+33 1 39 67 94 42 (Phone)
+33 1 39 67 70 86 (Fax)
HOME PAGE: http://www.hec.fr/stolowy