An International Meeting of the American Accounting Association American Accounting Association 2006 Annual Meeting August 6–9, 2006 Washington, D.C.

Yuan Ding
Hec School Of Management Paris/ceibs

François Degeorge
University of Lugano Switzerland

Thomas Jeanjean
HEC School of Management Paris

Hervé Stolowy
HEC School of Management Paris

Abstract: We investigate the role of analyst following as a monitoring device reducing earnings management. In a large international sample, we find that the more transparent the country, the stronger the reduction in earnings management activity associated with analyst following. More transparent countries also exhibit more evidence of earnings management to reach the analyst consensus, but this cost is more than offset by the benefit of transparency to the effectiveness of analyst monitoring. In opaque countries, analyst following does not act as a curb on total earnings management, but neither does it create any short-term pressure to manage earnings.

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