Research On Management Professional Ability And The Quality Of Earnings Forecast

As a kind of forecast information, the earnings forecast information is endowed with uncertainty and risk. But earnings forecast information provides the enterprise’s possible operating income, net profit, etc in the forecast period, which is very useful for information users to make reasonable economic decisions. Accurate earnings forecast information will help users make reasonable and effective decisions, but inaccurate earnings forecast information will mislead the users, so the quality of the earnings forecast information is concerned by investors. Previous research is mostly about the effect of different companies’characteristics on the quality of the earnings forecasts. According to the theory of Upper Echelons Theory, differences of cognitive style and concepts between individuals can affect the judgment of information. So the differences of management professional ability make not ignored influence on the quality of earnings forecast information.The essay selected the samples which were Initial Public Offerings companies in Shanghai Stock Exchange and Shenzhen Stock Exchange since China implemented the instruction of voluntary disclosure earnings forecast. Then the essay research the effect of managers professional ability made on quality of the earnings forecast information with the perspective of age, educational background, professional title, work experience and tenure. Also, we select the debt-to-asset ratio, equity concentration and float ratio as control variables. The results show that the managers’education background, work experience and tenure have significant difference to the quality of earnings forecasts, managers with accounting professional background disclose the earning forecast information with smaller error, and the managers with more work experience and longer tenure always make forecast information with high quality, but management age, degree and title have no significant effect on the quality of earnings forecasts. Equity concentration and quality of earnings forecasts that has negative correlation may be due to the ownership concentration is higher, the chance of a major shareholders manipulate earnings forecasts is more possible. Big shareholders may realize their own interests through the manipulation of earnings forecast information and lead to the loss of medium and small investors interests.Finally combining with current situation of earnings forecast disclosure in our country and research results, we put forward policy suggestions from the view of the sound system and corporate governance, including establishing and perfecting the laws of IPO company profit forecast, in order to improve the initiative of company disclosure forecast information voluntarily. Establish the profit forecast information disclosure system of civil compensation liability and multilayer regulatory system, strengthening the quality of investors, training up financial analysts of high quality, lower equity concentration. Sound system can standardize the information disclosure of companies in our country, so as to achieve the rapid development of capital market.