The Impact of Terminating Mandatory Financial Forecasts on Management Earnings Forecast Behavior—In the Perspectives on Corporate Governance
Date Issued
2007
Date
2007
Author(s)
Chen, Sz-Ying
DOI
zh-TW
Abstract
Financial Supervisory Commission of Executive Yuan has decided to terminate the regulation of mandatory disclosure of financial forecasts in order to improve the quality of financial forecasts since 2005. The study examines the effect of terminating the mandatory regulation on management earnings forecasts’ behavior. Furthermore, we examine the change of the effects of corporate governance on management earnings forecasts after terminating the regulation.
The empirical results show that firms with larger size of board of director, less independent directors, and greater debt ratio are more likely to issue earning forecasts voluntarily. In addition, firms with more outside directors are inclined to forecast more optimistically. After terminating the regulation of mandatory disclosure of financial forecasts, managers are less likely to make an earnings forecast and inclined to forecast more optimistically. Additional analysis suggests that companies of electronics industry which have more independent directors are less likely to issue earnings forecasts voluntarily before terminating the regulation. But after terminating the regulation, the proportion of independent directors is positively associated with the willingness of disclosure. Companies of non-electronic industry with greater debt ratio are more likely to make an earnings forecast before terminating the regulation. After terminating the regulation, debt ratio is negatively associated with the willingness of disclosure. But the effect of debt ratio is not obvious.
Subjects
自願性盈餘預測
公司治理
揭露意願
準確性
樂觀偏差
Voluntary earnings forecasts
Corporate governance
willingness of disclosure
Accuracy
Optimistic biased
Type
other
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