We examine country-level determinants of private information search incentives, and whether analysts’ role in constraining managers’ opportunistic earnings management varies across countries. In a sample of 31,312 firm-year observations originating from 30 countries, we document that: (1) analyst coverage is negatively (positively) related to the level of corporate disclosure (how secretive the national culture is); (2) the negative association between analyst coverage and earnings management is observed in stronger investor protection countries but not in weaker investor protection countries; and (3) analyst monitoring fails to mitigate culturedriven earnings manipulations in countries with more individualistic and uncertainty-tolerant cultures. Taken together, financial analysts’ role in constraining opportunistic earnings management across countries appears to vary with corporate disclosure and cultural environments.
Analyst Coverage, Earnings Management, Corporate Disclosure, National Culture, Investor Protection
Finance and Financial Management | International Business | Portfolio and Security Analysis | Sociology of Culture
Corporate Governance and Accountability
HAN, Soongsoo (Sam); KANG, Tony; Lobo, Gerald; and YOO, Yong Keun.
International Evidence on Analyst Monitoring and Earnings Management: The Roles of Corporate Disclosure and National Culture. (2009). Research Collection School Of Accountancy (SMU Access Only).
Available at: http://ink.library.smu.edu.sg/soa_research_smu/10