Research On Financial Distress And Characteristics Of Management Earnings Forecasts

With the rapid development of capital market,stockholders pay more and more attention to the forward-looking information.Management earnings forecasts,one of the main communicating channels between outside investors and insiders,have a big effect on the operation and development of capital market.The supervisors have launched a series of rules to regulate the releasing of management earnings forecasts,some of which are mandatory,but obviously managers still could choose the traits of management earnings forecasts freely,such as accuracy,precision and tendency,etc.With the background of regular conditions,some learners hold an idea that management earnings forecasts truly disperse information which can help stockholders make decisions;others think managers' behavior of information disclosure presents opportunistic to some extent.While a great number of existing researches are underlain by the common conditions,special conditions are given little attention.Based on this,the paper concerns one of the special conditions--financial distress in order to supplement the existing studies.In the article,I choose the Shanghai and Shenzhen A-share listed companies between 2007 and 2014 as research sample,aiming at finding out the effect of financial distress on management earnings forecasts' traits.The paper conducts the research in the following way:firstly,the paper summarizes existing research literature both on financial distress and characteristics of management earnings forecasts;secondly,it tests and explores effects of financial distress on management earnings forecasts'characteristics using empirical models,which is based on data of Chinese A-share listed companies;finally,in view of the above,several conclusions and relative policy proposals are put forward;The article analyses how financial distress influences the managers' behavior of information disclosure empirically.By investigating the accuracy,precision and face changing of management earnings forecasts under financial distress,the article tries to study the outcome of financial distress further;it may also extend the study of management earnings forecasts'traits,so that it provides a new perspective of relevant study.The article also targets at supplying suggestions on improving financial forecast information disclosure,which benefits the achievement of stockholders' protection.This study finds that financial distress may influence managers on releasing less accurate earnings forecasts;contrary to the non-financial distress counterparts,management earnings forecasts of companies in financial distress may reflect higher precision;the article also gives evidence to the high frequency of face changing of management earnings forecasts when the companies are in financial distress.These conclusions have confirmed opportunistic behavior of managers' information disclosure under financial distress and summarized features of management earnings forecasts under financial distress,which aims at reminding investors to understand information carefully contained in management earnings forecasts,providing advice for regulators to efficiently supervise information disclosure.The innovations mainly reflect as follows:firstly,while the existing literature is based on conventional environment,this article attempts to use a different approach to investigate traits of management earnings forecasts disclosure,in the perspective of the particular situation(financial distress);secondly,the existing researches of management earnings forecasts mainly focus on the accuracy,precision and face changing,this article will study the features selection for strategy,as an innovation from the research content.In addition,the face changing in related literature is often available with a case study,lacking of relevant empirical research;thirdly,characteristics of management earnings forecasts in most of existing research are based on the conventional conditions,eliminating abnormal samples,this paper argues that management under financial distress reflects some similar features in management earnings forecasts disclosure.With analysis of accuracy,precision and face changing of management earnings forecasts,the paper considers the situation of financial trouble,in order to investigate whether financial distress will affect management predictive surplus information disclosure.