A Study On Incentives Of Forward-Looking Information In "Management Discussion And Analysis"

Management discussion and analysis (MD&A) is the outcome of the continuing changing on disclosure rules in mature capital markets, e.g.: American capital market. It is an important part of registrants'reports. By reading MD&A reports, investors can see the actual performance of the company through management's eyes. Their requirements on the related and forward-looking information can be satisfied. Forward-looking information is critical for investors, because accurate forward-looking information could help its readers predict the future trends and lead them to make right investing decisionsIn China, more and more people have noticed the importance of MD&A forward-looking information. The latest disclosure rules on annual reports set by Chinese Securities Commission asked Chinese registrants to disclose more detailed forward-looking information. To study the incentives of disclosure level on forward-looking information, 94 companies were chosen from Shanghai stock exchange market, their annual reports from 2004 to 2005 were read and then all the reports on forward–looking information were scored by researcher using a self-designed forward-looking information disclosure indexes.At the beginning, we gave an introduction on the background and purposes of the study. Then a simply review on the development of MD&A forward-looking information disclosure were done. We also introduced a lot of scholars'researches which had paid a lot of attention on the MD&A disclosure. Based on their findings, controlling the influence of corporate governance and corporate size, we build up some regressions to terrify whether company's performance, their capital markets considerations and product markets considerations are incentives of their MD&A forward-looking information disclosure.The empirical results show that managers'decision on disclosing forward-looking information are actually determined by the company's performance, their consideration on the capital market and product markets. Based on the results, in the last part we gave some suggestions to investors on how to understand the forward-looking information in a reasonable way. And we proposed some suggestions on how to encourage registrants to disclose other than hinder more accurate forward-looking information, too.