Voluntary Disclosure and Innovation: International Evidence from Management Earnings Forecasts.

ABSTRACT This paper documents that changes in litigation risk affect corporate voluntary disclosure practices. We make causal inferences by exploiting three legal events that generate exogenous variations in firms' litigation risk. Using a matching-based fixed-effect difference-in-differences design, we find that the treated firms tend to make fewer (more) management earnings forecasts relative to the control firms when they expect litigation risk to be lower (higher) following the legal event. The results are concentrated on the earnings forecasts conveying negative news and are robust to alternative specifications, samples, and outcome variables. JEL Classifications: D80; G14; K22; K41; M41.

Download Full-text

The effects of earnings management, inside information, and voluntary disclosure choice on the accuracy of management earnings forecasts

Asia-Pacific Journal of Accounting & Economics ◽

10.1080/16081625.2000.10510574 ◽

2000 ◽

Vol 7 (1) ◽

pp. 37-58

Author(s):

Hongtao Guo ◽

David A. Ziebart

Keyword(s):

Earnings Management ◽

Voluntary Disclosure ◽

Earnings Forecasts ◽

Management Earnings Forecasts ◽

Inside Information

Download Full-text

Restatement Disclosures and Management Earnings Forecasts

Accounting Horizons ◽

10.2308/acch-50414 ◽

2013 ◽

Vol 27 (2) ◽

pp. 347-369 ◽

Cited By ~ 9

Author(s):

Michael Ettredge ◽

Ying Huang ◽

Weining Zhang

Keyword(s):

Voluntary Disclosure ◽

Earnings Forecasts ◽

Management Earnings Forecasts ◽

Quarterly Earnings ◽

Financial Restatements ◽

The Impact ◽

Information Providers

SYNOPSIS We examine the impact of financial restatements on managers' subsequent earnings forecasts. We argue that restatements create conflicting incentives. One incentive is to repair manager reputations as information providers by providing more and better guidance via earnings forecasts. The opposing incentive is to avoid risk by reducing the information in forecasts. We find that compared to control firms, restatement companies exhibit a decreased propensity to issue quarterly earnings forecasts following restatements. Those that do make forecasts issue fewer forecasts in post-restatement periods. We also find that post-restatement forecasts are less precise, and are less optimistically biased. Overall, our results suggest that, rather than increasing voluntary disclosure in the form of forecasts, managers of restatement companies exhibit risk-averting forecasting behavior following restatements.

Download Full-text

The Impact Of Social Capital On The Propensity And Properties Of Management Earnings Forecasts

Journal of Applied Business Research (JABR) ◽

10.19030/jabr.v30i6.8895 ◽

2014 ◽

Vol 30 (6) ◽

pp. 1803

Author(s):

Xinyi Lu

Keyword(s):

United States ◽

Social Capital ◽

Voluntary Disclosure ◽

Earnings Forecasts ◽

The United States ◽

Earnings Forecast ◽

Management Earnings Forecasts ◽

Financial Factor ◽

The Impact ◽

The Relationship

This paper examines the relationship between the regional variation in social capital in the United States and the propensity and properties of the management earnings forecasts. Social capital refers to connections among individualssocial networks and the norms of reciprocity and trustworthiness that arise from them (Putnam 2000). Using a comprehensive sample of companies in the United States, we find that firms located in region with higher social capital are more likely to issue a management earnings forecast and are inclined to forecast more frequently. In addition, earnings forecasts made by those firms tend to be more specific. Our findings suggest that mangers of firms in the high social capital regions are more likely to be concerned about their reputation of providing transparent information regarding their businesses because of the close connections among individuals and the greater propensities to honor obligations. This study contributes to the accounting literature by identifying a non-financial factor (i.e., social capital) that affects managements voluntary disclosure practices.

Download Full-text

Voluntary Disclosure, Legal Institutions, and Firm Valuation: Evidence from U.S. Cross-Listed Foreign Firms

Journal of International Accounting Research ◽

10.2308/jiar-50842 ◽

2014 ◽

Vol 13 (2) ◽

pp. 57-85 ◽

Cited By ~ 7

Author(s):

Yaqi Shi ◽

Jeong-Bon Kim ◽

Michel L. Magnan

Keyword(s):

Voluntary Disclosure ◽

Earnings Forecasts ◽

Firm Valuation ◽

Economic Consequences ◽

Sensitivity Analyses ◽

Foreign Firms ◽

Management Earnings Forecasts ◽

Listed Firms ◽

Forecast Precision ◽

Legal Regimes

ABSTRACT Building on the bonding hypothesis, this paper examines the economic consequences of voluntary management earnings forecasts (MFs) made by foreign firms cross-listed in the U.S. market. Our work reveals the following. First, cross-listed firms that voluntarily issue MFs exhibit higher firm valuation (Tobin's Q) than those that do not issue MFs, with forecast precision and frequency further enhancing valuation premiums. Additionally, the valuation premium of MFs is more pronounced for cross-listed firms than for a matched sample of U.S. domestic firms. Second, cross-listed firms from countries with weaker legal regimes are valued more for their voluntary forecasts relative to those from stronger legal regimes. Third, further sensitivity analyses suggest that valuation implications from MFs are more consistent with reputational bonding than with a signaling perspective. Finally, our mediation analysis suggests that voluntary disclosures of MFs are an important channel through which the information environment positively influences firm valuation. Overall, our study contributes to both the voluntary disclosure and cross-listing literatures. JEL Classifications: G14; G15; G32; G34; M41.

Download Full-text

Technological Peer Pressure and Product Disclosure

The Accounting Review ◽

10.2308/accr-52056 ◽

2018 ◽

Vol 93 (6) ◽

pp. 95-126 ◽

Cited By ~ 13

Author(s):

Sean Shun Cao ◽

Guang Ma ◽

Jennifer Wu Tucker ◽

Chi Wan

Keyword(s):

Product Development ◽

Voluntary Disclosure ◽

Earnings Forecasts ◽

Peer Pressure ◽

Data Availability ◽

Test Results ◽

Management Earnings Forecasts ◽

Press Releases ◽

Negative Relation ◽

Proprietary Costs

ABSTRACT We introduce a firm-specific measure of the technological aspect of competition—technological peer pressure—and examine firm-initiated product development-related press releases. We argue that empirical examinations of the theorized negative relation between competition and disclosure require the type of voluntary disclosure to be relevant to the dimension of competition under examination to ensure that firms incur significant proprietary costs of disclosure. In other words, many types of disclosure do not provide actionable information to competitors and, thus, should not be affected by that dimension of competition. We expect a negative relation between technological peer pressure and product disclosure because the latter reveals firms' strategies, allocations, and progress of technological investments in product development to competitors. In contrast, we do not expect a negative relation between technological peer pressure and management earnings forecasts—the most common type of voluntary disclosure used in accounting research. Our test results are consistent with these expectations. Data Availability: All data are available from public sources. Our TPP Measure is available for download, please see the link in Appendix G.

Download Full-text

The effect of disclosure regulation on the bias and accuracy of management earnings forecasts in Malaysian IPO prospectuses

Journal of Financial Reporting and Accounting ◽

10.1108/jfra-11-2015-0099 ◽

2017 ◽

Vol 15 (1) ◽

pp. 59-77 ◽

Cited By ~ 4

Author(s):

Mohammed Abdullah Ammer ◽

Nurwati A. Ahmad-Zaluki

Keyword(s):

Initial Public Offering ◽

Voluntary Disclosure ◽

Earnings Forecasts ◽

Management Earnings Forecasts ◽

Multivariate Statistical ◽

Disclosure Regulation ◽

Content Type ◽

Study Results ◽

The Impact

Purpose This paper aims to examine the impact of disclosure regulation on the levels of bias and accuracy in management earnings forecasts disclosed in the prospectuses of Malaysian initial public offering (IPO). Specifically, the authors investigated the two environments of regulation (mandatory versus voluntary) to draw some conclusions regarding the benefits of regulating disclosure of management earnings forecasts. Design/methodology/approach A sample of 111 Malaysian IPOs listing on the Main Market of Bursa Malaysia from January 1, 2004 to February 29, 2012 was used. The paper uses both univariate and multivariate statistical analyses on this sample of IPOs. Findings The empirical results of these multivariate regressions indicated that disclosure regulation has positive and significant impact on the bias and accuracy of management earnings forecasts disclosed in IPO prospectus. In general, the study results suggest that using disclosure regulation to improve the quality of IPO earnings forecasts can be, to some extent, an effective strategy. Practical implications The findings of this study have important implications for regulators and investors. The findings can provide them some relevant insights on the improvements to the earnings forecasts accuracy and trends of the forecast (optimistic or pessimistic) after the change from mandatory to voluntary disclosure. Thus, the authorities may learn whether this change is an effective policy or whether the regime of mandatory disclosure was better for IPO companies and should be reversed. Originality/value This study is regarded as the first attempt to investigate the impact of reforms in disclosure regulation on the quality of management earnings forecasts of IPO prospectuses in a developing nation such as Malaysia. In spite of this, the paper focuses on a single country, and it contributes significant insights to the debate about the credibility of IPO management earnings forecasts.

Download Full-text