Empirical examination of disclosure environment in Japan - quarterly earnings announcements and management forecasts -

点击翻译按钮获取中文摘要

Timely Disclosure Rule set by the stock exchanges in Japan provides with a unique disclosure environment. Specifically the rule requests corporate managers to reveal their own earnings forecasts. To comply with this requirement, more than 90 percent of listed firms make forecasting and revising. Such prevalence of management forecast, except voluntary disclosure in a far limited scope, rarely happens among well-developed major capital markets. This research project examines the properties of management forecasts. Empirical results covering all listed companies suggest that (1)initial management forecasts at annual earnings announcement dates seem to be overly optimistic, which are followed by consecutive downward revisions during the fiscal/years. This finding is inconsistent with the one observed in the US market, where their voluntary forecasts are, in general, more cautious and more preemptive for bad news. Apparently managers' over-optimism in Japan raise a question about the decision usefulness of their forecasts ; however, we also find that (2)the predictability of future earnings growth in management forecast overwhelmingly outperforms the one measured by realized accounting numbers. Underling management's motivation of this bias of forecasting and its market reaction remains opening issues for our future research.