Labor protection,information disclosure and analyst forecasts:Evidence from China's Labor Contract Law

Labor protection increases employees’stability and strengthens their monitoring role,improving firms’information environment and increasing analysts’earnings forecast accuracy.Using the implementation of China’s Labor Contract Law as a quasi-natural experiment,we find that labor protection significantly improves analyst forecasts.This positive impact is stronger when agency problems are weaker,board independence is greater,corporate reputation is better and industry competition is more intense.Enhanced labor protection significantly reduces firms’business risk and accrual-based earnings management,decreases stock price synchronicity and increases market pricing efficiency.Our findings of significant impacts of China’s Labor Contract Law on analysts’forecasting behaviors offer important guidance for promoting the development of the Chinese capital market and policy making in labor protection.

The Impact of Competition on Analysts’Forecasts:A Simple Agent-Based Model

This paper builds an agent-based model to study the impact of analyst competition on analyst optimism.Two strategies(a catering strategy and a pressure strategy)are used to model analysts conflicts of interest between listed corporations and institutional clients.The finding suggests that the relationship between competition and analyst optimism is nonlinear.Low-level competition generates more analyst unbiased forecasts.However,the condition of no competition or high-level competition generates more analyst optimistic forecasts.The empirical test also confirms that analysts issue less biased earnings forecasts under the condition of low-level competition.

Mandatory CSR disclosure and analyst forecast properties:Evidence from a quasi-natural experiment in China

Based on a quasi-natural experiment that mandates a subset of listed firms to issue standalone corporate social responsibility(CSR)reports,we examine whether mandatory CSR disclosure improves analysts’information environment.We focus on two properties of analysts’earnings forecasts:forecast error and forecast dispersion.We find that the mandatory issuance of standalone CSR reports is related to less forecast error and less dispersed forecasts,and the effect varies with the firm-level information environment and provincelevel marketization.Additional tests show that the improvement in forecast properties is mainly driven by CSR reports that i)are of high quality and ii)contain more long-term-oriented information than other CSR reports.Our findings provide evidence that mandatory CSR disclosure plays an important informational role for financial analysts.

Does an abnormal change in deferred tax assets interfere with analysts' earnings forecasts?

In 2007,China adopted the single balance sheet liability method for tax accounting,but its shortcomings have emerged.I sample A-share listed companies from 2007 to 2018 to study whether an abnormal change in deferred tax assets interferes with analysts’earnings forecasts and find that an abnormal change in deferred tax assets increases the error and divergence of these forecasts.Compared with a negative abnormal change in deferred tax assets,a positive abnormal change has a greater impact on earnings forecasts.Additionally,the level of corporate governance,audit quality and analysts’professional ability have moderating effects on the correlation between an abnormal change in deferred tax assets and earnings forecasts.However,an abnormal change in deferred tax liabilities does not have a significant impact on that correlation.

Stock index adjustments and analysts' forecast optimism:A quasi-natural experiment on the CSI 300 Index

As stock index adjustments comprise a basic system of capital market,their potential influence on analysts’earnings forecasts is worthy of research.Based on a research sample of 23 adjustments to the CSI 300 Index from June 2007 to June 2018 and the backup stocks announced during the same period,this study examines the impact of additions to stock index on analysts’forecast optimism using a staggered difference-in-differences model.The research results show that after stocks are added to the stock index,analysts’earnings forecast optimism about these stocks increases significantly.Cross-sectional analysis indicates that this increase is more significant when the market is bullish,institutional ownership is low,the ratio of listed brokerage firms is low,star analyst coverage is low,firms show seasoned equity offering activity,the ratio of analysts from the top five brokerage firms ranked by commission income is high,and the analysts’brokerage firms are shareholders.However,analystlevel tests find that analysts’ability helps to reduce the impact of additions to stock index on earnings forecast optimism.Furthermore,additions to stock index significantly increase analyst coverage and forecast divergence.Economic consequences tests find additions to stock index significantly increases stock price synchronization,which is partly mediated by analysts’earnings forecast optimism.This study enriches the literature on the impact of basic capital market systems and analyst behavior.The findings suggest that investors should rationally evaluate analysts’earnings forecasts for stocks added to the stock index and obtain further information from various channels to improve asset allocation efficiency.