The Role of Financial Analysts in Deterring Corporate Fraud in China

2011 ◽  
Author(s):  
Douglas J. Cumming ◽  
Wenxuan Hou ◽  
Edward Lee
Keyword(s):  
Financial Analysts ◽  
Corporate Fraud

Do financial analysts discourage or encourage corporate fraud? Empirical evidence from China

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Hui Liu ◽  
Bei Yang ◽  
Junrui Zhang
Keyword(s):  
Financial Crisis ◽  
Financial Analysts ◽  
Chinese Stock Market ◽  
Corporate Fraud ◽  
Analyst Coverage ◽  
Content Type ◽  
Information Transparency ◽  
Path Analyses ◽  
The Impact

Purpose This paper aims to focus on the role of financial analysts in corporate fraud in the Chinese stock market. Design/methodology/approach Data on the analyst coverage and all the types of corporate fraud were obtained for 16,284 company-year observations of Chinese companies. The sample was subsequently divided into those of state-owned enterprises, before and after financial crisis. Findings The overall results indicate that analyst coverage effectively deters the occurrence of fraud. The sub-sample results suggest that the impact of analysts on deterring fraud is more pronounced in non-state-owned enterprises, especially after the financial crisis. The path analyses show that analyst coverage can deter corporate frauds by affecting information transparency and investor attention. Furthermore, the results show that the deterrence role of financial analysts varies with fraud types: it is more pronounced in deterring disclosure fraud, but not as effective in illegal guarantees and illegal insider dealing. Moreover, analyst coverage can deter the occurrence of fictitious reporting, intentional postponement and material omission. Originality/value This paper not only examined the overall fraud probability but also taking into consideration the heterogeneity of the information availability and research focus of financial analysts and examined the analysts’ impact on the occurrence of difference types of fraud. Moreover, this paper explored why financial analysts can deter corporate frauds through path analyses.

Comprehensive Income: which potential effects on firms' performance evaluation and users' decision process?

2016 ◽  
pp. 55-94
Author(s):  
Pier Luigi Marchini ◽  
Carlotta D'Este
Keyword(s):  
Performance Evaluation ◽  
Decision Process ◽  
Financial Analysts ◽  
Listed Companies ◽  
Financial Statement ◽  
Comprehensive Income ◽  
Other Comprehensive Income ◽  
Gains And Losses ◽  
The Impact

The reporting of comprehensive income is becoming increasingly important. After the introduction of Other Comprehensive Income (OCI) reporting, as required by the 2007 IAS 1-revised, the IASB is currently seeking inputs from investors on the usefulness of unrealized gains and losses and on the role of comprehensive income. This circumstance is of particular relevance in code law countries, as local pre-IFRS accounting models influence financial statement preparers and users. This study aims at investigating the role played by unrealized gains and losses reporting on users' decision process, by examining the impact of OCI on the Italian listed companies RoE ratio and by surveying a sample of financial analysts, also content analysing their formal reports. The results show that the reporting of comprehensive income does not affect the financial statement users' decision process, although it statistically affects Italian listed entities' performance.

scholarly journals Financial Markets’ Governance, Transparency and Informational Efficiency: Role of IfRS Norms, Auditors and Financial Analysts

2016 ◽  
Vol 9 (5) ◽  
pp. 100
Author(s):  
Imen Lamiri ◽  
Adel Boubaker
Keyword(s):  
Financial Markets ◽  
Stock Prices ◽  
Stock Price ◽  
Financial Analysts ◽  
Negative Relationship ◽  
Developed Countries ◽  
Coefficient Of Determination ◽  
Specific Information ◽  
Informational Efficiency

<p>This article explores the informational role of three essential modern financial markets actors such IFRS norms, the Big”4” and the financial analysts for a panel of emergent and developed countries during the period from 2001 to 2010. We hypothesis that these mechanisms help improving the quality of specific information incorporated into stock prices measured by the stock price synchronicity (SPS). The main result is that both financial analyst’s coverage and IFRS adoption's effects seem to be stronger for emerging than developed markets. The results also show a negative relationship between auditors’ opinion and coefficient of determination (R<sup>2</sup>).</p>

scholarly journals The Monitoring Role of Financial Analysts: An International Evidence

2015 ◽  
Vol 05 (05) ◽  
pp. 258-263
Author(s):  
Ahmed Marhfor ◽  
Rachid Ghilal ◽  
Bouchra M’Zali
Keyword(s):  
Financial Analysts ◽  
International Evidence

scholarly journals Empirical Evidence On The Valuation Of Financial Information In France

2010 ◽  
Vol 9 (3) ◽  
Author(s):  
Melita Stephanou-Charitou ◽  
Adamos Vlittis
Keyword(s):  
Financial Analysts ◽  
Investment Decisions ◽  
Cash Flows ◽  
Financial Information ◽  
Major Research ◽  
French Firm ◽  
First Results ◽  
Financial Scandals ◽  
Credit Financing

We propose and examine empirically the role of financial information; namely, earnings and cash flows in France.  The dataset consists of more than 1,000 French firm-year observations over a ten-year period. Regression analysis is undertaken to test the major research hypotheses.  The major conclusions drawn from the empirical results are summarized as follows.  First, results indicate that both earnings and cash flows are taken into consideration by French investors in their investment decisions.  Second, given cash flows, results show that earnings are always very important to investors and financial analysts for investment purposes.  However, results reveal that investors in France place much more attention to earnings and less attention to cash flows. In summary, the evidence provided in this study supports that indeed there are substantial differences in the way investors and financial analysts perceive financial information, such as earnings and cash flows in France.  The results of this study should be of great importance to the major stakeholders, such as investors, creditors and financial analysts, especially after the latest financial scandals and collapses of giant organizations worldwide.  Furthermore, these results support that fundamental analysis plays a very important role in the capital markets and it should be taken more seriously into consideration by the stakeholders for investing, credit, financing and valuation analysis purposes.

scholarly journals THE ROLE OF INTERNAL AUDIT IN THE SUPPRESSION AND PREVENTION OF CORPORATE FRAUD

2018 ◽  
Author(s):  
Юлия Мезенцева ◽  
Yuliya Mezentseva ◽  
Ксения Вердеш ◽  
Ksenia Verdesh
Keyword(s):  
Internal Audit ◽  
Economic Security ◽  
Corporate Fraud ◽  
Audit System ◽  
General Signs

The article presents the author's view on the role of internal audit in the prevention of corporate fraud, the main aspects of the internal audit service. Attention is paid to the consideration of the General signs of corporate crimes. Corporate fraud is considered as a significant threat to the economic security of the company, and the organization of an effective internal audit system – as one of the mechanisms to prevent them.

scholarly journals Voluntary intellectual capital disclosure and earnings forecast in Indonesia–Malaysia–Thailand growth triangle's pharmaceuticals sector

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Saarce Elsye Hatane ◽  
Jefferson Clarenzo Diandra ◽  
Josua Tarigan ◽  
Ferry Jie
Keyword(s):  
Pharmaceutical Industry ◽  
Intellectual Capital ◽  
Strategic Alliances ◽  
Stock Exchange ◽  
Financial Analysts ◽  
Earnings Forecast ◽  
Relational Capital ◽  
Content Type ◽  
Earnings Forecasting

PurposeThis study examines the role of intellectual capital disclosure (ICD) on earnings forecasting by analysts in the pharmaceutical industry in emerging countries, particularly in Indonesia, Malaysia and Thailand. This study specifically examines the role of each component of the ICD on analysts' forecasts, which consists of errors of forecasted earnings, the standard deviation of forecasted earnings and analyst recommendations.Design/methodology/approachPanel data analysis is conducted using a sample of 17 companies from pharmaceuticals industries in Indonesia, Malaysia, Thailand – Growth Triangle (IMT-GT), which are listed in the Indonesia Stock Exchange (IDX), Malaysia Stock Exchange (MYX) and Stock Exchange of Thailand (SET) from 2010 to 2017. Secondary data is obtained from Bloomberg and Annual report, where they are being analyzed to measure the ICD and gather the control variables.FindingsThe results indicate that the three components of ICD, namely human capital disclosure (HCD), structural capital disclosure (SCD) and relational capital disclosure (RCD), insignificantly influence average analysts' consensus recommendation and analysts' earnings forecast dispersion. However, the findings show a significant negative influence of relational capital disclosure (RCD) on analysts' earnings forecast error. In contrast, HCD and SCD have an insignificant impact.Practical implicationsTransparency in disclosing activities related to external parties is essential for the pharmaceutical industry. It is found that relational capital disclosure is the only ICD indicator that can strengthen analysts' profit predictions. Transparency about company activities in maintaining customer satisfaction and activities related to strategic alliances with other organizations are two critical things that can accommodate the accuracy of earnings forecasting from analysts in pharmaceutical companies.Originality/valueThis study contributes to ICD-related research by discussing the financial analyst's response to this voluntary disclosure in the pharmaceutical industry, particularly in Indonesia, Malaysia and Thailand. The selected observation period is seven years, starting one year after the global financial crisis. The results showed that the disclosure of IC is not an exciting thing for financial analysts. In forecasting current earnings, financial analysts are more interested in errors than the previous year's estimates.

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