The Consequences of Management Earnings Forecast Regulation: Stock Price Informativeness and Disclosure Externalities
55 Pages Posted: 12 Feb 2019
Date Written: January 31, 2019
Abstract
We examine the consequences of a management earnings forecast regulation implemented in a staggered manner. The regulation substantially increases the directly affected firms’ frequency of management forecasts. Nevertheless, approximately 14% of the directly affected firms fail to comply with the regulation (noncompliant firms). The regulation helps increase the stock price informativeness of the directly affected firms that issue a forecast. The regulation also helps increase the stock price informativeness of the noncompliant firms (a spillover), but we find no evidence of a similar spillover for the firms that are not required to issue mandatory forecasts in the post-regulation period.
Keywords: Disclosure regulation; Management’s earnings forecast; Stock price informativeness; Spillover effect; China
JEL Classification: G38, M41, K22
Suggested Citation: Suggested Citation