A Study On The Effect Of Management Earnings Pre-announcement On Analysts Forecast Revisions

In 1998,China Security Regulatory Commission put forward for the first time that the listed companies should disclosure management earnings pre-announcement.And in the following ten years,China Security Regulatory Commission expanded constantly the scope of mandatory disclosure of management earnings pre-announcement.However,those policies simply set rules for which company should disclose management earnings pre-announcement,and did not make clear the form and format of management earnings pre-announcement.Indeed,it is still an unsolved question that whether the effect of management earnings pre-announcements with different characteristics on the alleviation of information asymmetry and the adjustment of market expectation is different.Based on this background,this paper will explore the effect of management earnings pre-announcement on analysts forecast revisions,and attempt to provide theoretical basis for policymakers to improve and perfect the rules and congratulations and for management of listed companies to make decision on how to disclosure their earnings pre-announcement.This paper mainly set the information asymmetry theory,signal transfer theory and impression management theory as foundation,analyzing the relation between unexpected earnings and the magnitude of analyst revision.Additionally,this paper tests whether management earnings pre-announcement reduces analysts forecast error.The results show that the magnitude of analysts forecast revision is positively associated with the unexpected earnings,and this relation will be more significant when management earnings pre-announcement is issued with shorter horizon,higher precision or less self-serving attribution.In addition,the analysts forecast error is decreased after management earnings pre-announcement,and the shorter horizon,higher precision or less self-serving attribution the management earnings pre-announcement is issued with,the more decreased.