This study examines whether investor protection affects the governance role of
analysts in constraining earnings management. Using a sample of 50,966
company-year observations from 24 countries for 1990–2007, the study finds
that earnings management is more negatively associated with analyst coverage in
weak investor protection countries than in strong investor protection countries.
The findings suggest that analyst coverage plays a more important governance
role in countries where investor protection is weak (i.e., a substitute
relationship exists between analyst coverage and investor protection).