Mangament Forecast Revision,Soft Information And Its Capital Market Effect

China starts her mandatory management forecast policy since 1998.The primary intention of this policy is to urge firms to correctly and timely disclose decision useful news.However,the policy turns out to be un-satisfactory.Firms frequently revise their early forecasts with untruthful attributions.Sometimes firms' earnings could be totally different betweent two adjacent forecasts.Obviously investors are not suitable with what the firms explained.Critcs say that the attributions combined with the management forecast revisions are useless or even misleading.I try to figure out what affects managers' choices in disclosing attributions in management forecasts and how do these attributions affect the capital market participants.I believe we could better assess the effect of our mandatory forecast policy through answering these questions.I read all management forecast revisions released during 2002 to 2012 and manually code the attributions into different categories.Based on this sample,I study the relation between management dismissal risk and the attribution type.The empirical results show that when the management forecast revision news is bad,mangers tend to attribute it to uncontrollable external factors.Moreover,the above finding is weaker when managers are less likely to be fired for poor performance.Further investigations show that the shareholders may be misled by managers' selective disclosure of attributions.I further examine how management forecast revision attributions affect analyst forecasts and the stock market reaction.Overall,the empirical results demonstrate that the attributions are not boilerplate disclosures.According to the specific situation,the attributions could either increase the credibility of other quantative information in management foecast revision(e.g.earnings numbers)or release value relevant information to investors by themselves.The empirical evidence provided in this paper could help the policy maker better assess the effect of mandatory forecast policy,and is also contributing to related literature.