Abstract: This paper studies the impact of financial analysts following on the degree of tax avoidance of the listed companies with the A-share listed companies in Shanghai and Shenzhen stock exchanges from 2004 to 2014 as the sample. The findings indicate that whether the analyst is following and the number of the following analysts are significantly and positively correlated with the behavior and degree of tax avoidance of the listed companies. When the star analysts are following the listed companies, the listed companies will be more inclined to choose tax avoidance, and the degree of the tax avoidance will be more significant. When the analyst does not follow, the extent of tax avoidance of the listed companies will be significantly reduced. This research result shows that the analyst following and the signing of the research reports would set higher earnings target for the reports of the listed companies, so as to induce the listed companies to achieve the target value predicated by the analyst through taking the tax avoidance activities. This result reveals the adverse consequences of the financial analyst following, which is beneficial to the literatures of the financial analyst following.

Key words: analyst following; tax avoidance behavior; star analysts