A Research On Voluntary Disclosure Of Earnings Forecast Of Listed Companies

Earnings forecast information disclosed by listed companies is beneficial to eliminating the asymmetric information existed between the internal managers and the external information users, it is meaningful in preventing low-down trade, promoting justice and efficiency of security market, and directing investors decisions.Before 2001, earnings forecast information was disclosed on a mandatory basis in the Chinese securities market. During this period, the accuracy of the forecast is rather low, so the earnings forecast did not show its usefulness, but brought great losses to investors. Therefore, from March 2001, Chinese security supervisor decided that earnings forecast disclosed on a voluntary basis. As it is not long since the decision has been implemented, up to now, few papers have been published about voluntary disclosure of earnings forecast information in China. This paper examined the accuracy of the earnings forecast disclosed from 2001 to 2003, studied the implement effect and problems existed, and then gave some advice to the problems.The results show that the accuracy of the earnings forecast disclosed on the voluntary basis is much higher compared with the accuracy of the earnings forecast disclosed on the mandatory basis. The Mean Absolute Forecast Error (MAFE) was 17% or so during the period of mandatorydisclosure, while the MAFE is 10.74% during the period of voluntary disclosure, and the proportion of the companies whose minus Forecast Error exceed 20% declined from 17.68% to 8.16%. At the same time, we find that the number of the companies that disclosed earnings forecast voluntarily has sharp decreased compared with the number of the companies disclosed earnings forecast mandatory, the proportion of the companies declined from 97.32% to 24%, Furthermore, under the circumstances that the whole level of the accuracy of earnings forecast has enhanced, there are still several companies whose forecast accuracy quite low.This paper analyses the reasons of the results and the problems, and offers the following suggestions, we should use the "Safe Harbor Rule" for reference, protect the legal disclosure action and encourage the public companies to disclose the earnings forecast voluntary; In order to improve the forecast accuracy, the level of forecast of the internal managers should be enhanced, and the strict supervision and punishment should be adopted; Public accountants and stockjobbers are also helpful to supervise the companies, and special institution and analysts should be cultivated to increase the competition in supplying earnings forecast and promote the public companies to disclose earnings forecast actively and accurately.