Voluntary Disclosure Credibility and Securities Prices: Evidence from Management Earnings Forecasts, 1969-73

Pownall, Grace; Waymire, Gregory B.

doi:10.2307/2491233

Cited by 144 publications

(77 citation statements)

References 29 publications

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“…Voluntary disclosure can further decrease the extent of information asymmetry and may indicate that a firm is performing well. Thus, compared with overall disclosure, voluntary disclosure attracts more attention from investors (Pownall & Waymire, 1989). Because investors target firms that are easier to monitor, the following hypothesis concerning information T&D on a voluntary basis and investment from FII is established:…”

Section: Hypothesis 1a Firms Complying With the Government-required mentioning

confidence: 99%

Does governance transparency lead to more supportive foreign investment?

Luan

Jiang

Tien

2016

JABS

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This paper attempts to delineate the relationship between a firm's information transparency and disclosure (T&D), by which it can attract more investment from FII (foreign institutional investors), and its associated performance impacted by FII investment. Employing a unique data set of ranking reports of transparency and disclosure of listed firms of Taiwan and the financial databank of the Taiwan Economic Journal, the results of the study show that the stronger the intent of a firm's voluntary disclosure concerning corporate governance, the more shares that FII will hold, which can lead to better performance for the invested firms, suggesting that FII provides resources not only to guard their investments but also to improve firm performance. Beyond regulatory requirement of disclosure, firms should strategize their efforts in disclosing governance information voluntarily; these efforts can generate external resources infusion, and the resources can help improve firm performance.

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Section: Hypothesis 1a Firms Complying With the Government-required mentioning

confidence: 99%

Does governance transparency lead to more supportive foreign investment?

Luan

Jiang

Tien

2016

JABS

View full text Add to dashboard Cite

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“…These incentives are sufficiently strong such that, although management earnings forecasts are voluntary and unaudited, management earnings forecasts move security prices (Patell 1976;Waymire 1984) and are viewed by the security market as at least as relevant to equity security pricing as actual earnings releases (Pownall and Waymire 1989).…”

Section: Basis For Expecting Change In Management Forecast Qualitymentioning

confidence: 99%

The Effect of Macro Information Environment Change on the Quality of Management Earnings Forecasts

2006

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The 1990s were characterized by substantial increases in the performance of and investor reliance on financial analysts. Because managers possess superior private information and issue forecasts to align investors' expectations with their own, we predict that managers increased the quality of their earnings forecasts during the 1990s in order to keep pace with the improved forward-looking information provided by financial analysts, upon which investors increasingly relied.Using a sample of 2,437 management earnings forecasts, we document an increase in management earnings forecast precision, management earnings forecast accuracy, and managers' tendency to explain earnings forecasts in 1993-1996 relative to 1983-1986. Given that these forecast characteristics are linked to greater informativeness and credibility, we also document that the information content of management earnings forecasts, as measured by the strength of share price responses to forecast news, increased in 1993 -1996 relative to 1983-1986. As expected, the increased information content of management forecasts primarily occurred for firms covered by financial analysts.

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“…The evidence does not support Trueman's hypothesis. Pownall and Waymire (1989) found that it is the forecast itself and not the voluntary disclosure that has information content. Watts and Zimmerman (1978) suggest that a positive theory for determining accounting standards be developed.…”

Section: Signalling Theorymentioning

confidence: 99%

“…One explanation for the variations in US findings is that most studies examine only point and range forecasts of annual earnings (e. g. Penman, 1980;Ajinkya and Gift, 1984;Waymire, 1984;McNichols, 1989;Pownall and Waymire, 1989) or very quantitative forecasts (e. g. Patell, 1976). Lev and Penman (1990) and Skinner (1994) consider point and range forecasts and, in addition, open ended (i. e. bounded from either above (upper-bound) and below (lower-bound)) and qualitative forecasts.…”

mentioning

confidence: 99%

“…US forecasts are collected from news reporting sources such as The Wall Street Journal (Patell, 1976;Imhoff, 1978;Jaggi and Grier, 1980;Cox, 1985;Penman, 1980;Ajinkya and Gift, 1984;Waymire, 1985;Pownall and Waymire, 1989;Lev and Penman, 1990), Dow Jones News Retrieval Service (McNichols, 1989;Ruland, Tung and George, 1990;Baginski, Hassell and Waymire, 1994;Skinner, 1994;Frankel, McNichols and Wilson, 1995;Skinner, 1995), both The Wall Street Journal and Dow Jones News Retrieval Service (Pownall, Wasley and Waymire, 1993) and from data bases such as Compustat (Ruland, 1979). Thus, the data for these studies are limited by the coverage of the data base accessed.…”

mentioning

confidence: 99%

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