The Consequences of Management Earnings Forecast Regulation: Stock Price Informativeness and Disclosure Externalities

55 Pages Posted: 12 Feb 2019

See all articles by Bin Ke

Bin Ke

National University of Singapore

Xiaojun Zhang

Peking University

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

Ke, Bin and Zhang, Xiaojun, The Consequences of Management Earnings Forecast Regulation: Stock Price Informativeness and Disclosure Externalities (January 31, 2019). Available at SSRN: https://ssrn.com/abstract=3327660 or http://dx.doi.org/10.2139/ssrn.3327660

Bin Ke (Contact Author)

National University of Singapore ( email )

Mochtar Riady Building, BIZ 1, #07-30
15 Kent Ridge Drive
Singapore, 119245
Singapore
+6566013133 (Phone)

Xiaojun Zhang

Peking University ( email )

No. 5 Yiheyuan Road
Haidian District
Beijing, Beijing 100871
China

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