Weak investor protection leads to more earnings manipulation with less analyst coverage.
The study looked at how analyst coverage affects earnings management in countries with different levels of investor protection. They analyzed data from 24 countries between 1990 and 2007 and found that in countries with weak investor protection, analyst coverage is more effective at limiting earnings management compared to countries with strong investor protection. This means that in countries where investor protection is lacking, analyst coverage plays a more important role in governance.