Rights statement: This is the author’s version of a work that was accepted for publication in International Review of Financial Analysis. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in International Review of Financial Analysis, 83, 2022 DOI: 10.1016/j.irfa.2022.102269
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Research output: Contribution to Journal/Magazine › Journal article › peer-review
Research output: Contribution to Journal/Magazine › Journal article › peer-review
}
TY - JOUR
T1 - Under watchful eyes
T2 - Analyst site visits and firm earnings management
AU - Gao, Zhan
AU - Quan, Xiaofeng
AU - Xv, Xinmei
N1 - This is the author’s version of a work that was accepted for publication in International Review of Financial Analysis. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in International Review of Financial Analysis, 83, 2022 DOI: 10.1016/j.irfa.2022.102269
PY - 2022/10/31
Y1 - 2022/10/31
N2 - This paper investigates whether analyst site visits, where sell-side analysts visit corporate sites and interact with management, reduce earnings management by host firms. Taking advantage of the disclosure of analyst site visits by Chinese listed firms, we find that the intensity of analyst site visits is negatively associated with discretionary accruals, and this relation is robust to controlling for endogeneity. Furthermore, we find that site visits attended by star analysts and including factory tours are associated with lower levels of discretionary accruals than those without these features. We also report that the number and coverage of questions posed during site visits are negatively associated with discretionary accruals. Our results demonstrate that site visits by sell-side analysts perform a vital monitoring role and exert significant constraints on firms' opportunistic financial reporting.
AB - This paper investigates whether analyst site visits, where sell-side analysts visit corporate sites and interact with management, reduce earnings management by host firms. Taking advantage of the disclosure of analyst site visits by Chinese listed firms, we find that the intensity of analyst site visits is negatively associated with discretionary accruals, and this relation is robust to controlling for endogeneity. Furthermore, we find that site visits attended by star analysts and including factory tours are associated with lower levels of discretionary accruals than those without these features. We also report that the number and coverage of questions posed during site visits are negatively associated with discretionary accruals. Our results demonstrate that site visits by sell-side analysts perform a vital monitoring role and exert significant constraints on firms' opportunistic financial reporting.
KW - Sell-side analysts
KW - Site visits
KW - Earnings management
KW - External monitoring
U2 - 10.1016/j.irfa.2022.102269
DO - 10.1016/j.irfa.2022.102269
M3 - Journal article
VL - 83
JO - International Review of Financial Analysis
JF - International Review of Financial Analysis
SN - 1057-5219
M1 - 102269
ER -