Abstract:

Shadow banking activities have received extensive attention from academia and supervisory bodies. To study this issue, this paper used data samples on China's listed non-financial enterprises from 2010 to 2017, obtained from the Standard & Poor's Compustat Global database, to examine the relationship between the shadow banking business of non-financial enterprises and the accuracy of analysts' predictions. This study found that the greater the participation of non-financial enterprises in shadow banking, the higher the error rate of analysts' predictions—that is, the lower their prediction accuracy. Further analysis showed that the above relationship was more significant in enterprises whose internal control quality, shareholding ratio of institutional investors, and credit ratings were low; moreover, it was observed that the shadow banking business of non-financial enterprises can increase the accrued earnings management of the enterprises and reduce the quality of information disclosure. The results remained robust after the measures of explanatory variables and explained variables were replaced. This study not only contributes to the literature on the economic consequences of the shadow banking business of non-financial enterprises and the accuracy of analysts' predictions, but also offers important guidance to analysts on being alert to the risks of shadow banking and market regulation.

Key words: shadow banking business, corporate governance, analysts' earnings forecast