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The effects of a mixed approach toward management earnings forecasts: evidence from China

Huang, Xiaobei, Li, Xi, Tse, Senyo and Tucker, Jennifer Wu (2018) The effects of a mixed approach toward management earnings forecasts: evidence from China. Journal of Business Finance and Accounting, 45 (3-4). pp. 319-351. ISSN 0306-686X

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Identification Number: 10.1111/jbfa.12306

Abstract

Chinese regulators mandate management earnings forecasts when managers’ earnings expectations meet bright-line thresholds and allow voluntary forecasts in other circumstances. We examine the effects of this mixed approach. We find that Chinese mandatory forecasts have significant information content. Moreover, we observe a learning effect: mandatory forecasts appear to stimulate voluntary forecasts in subsequent periods as managers become familiar with the forecasting and disclosing procedures through forced experience. We find one negative consequence of the mixed approach, however: managers appear to manipulate earnings to avoid the forecast threshold of large earnings decreases. Overall, we document the pros and cons of a mixed approach toward management earnings forecasts in a major emerging market.

Item Type: Article
Official URL: http://onlinelibrary.wiley.com/journal/10.1111/(IS...
Additional Information: © 2017 John Wiley & Sons Ltd
Divisions: Accounting
Subjects: H Social Sciences > HG Finance
Sets: Departments > Accounting
Date Deposited: 09 Mar 2018 11:38
Last Modified: 20 Nov 2019 05:30
Projects: 71602004
Funders: National Natural Science Foundation of China, Chinese Scholarship Council, University of Florida
URI: http://eprints.lse.ac.uk/id/eprint/87113

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