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A Study Of The Disclosure Strategy And Its Market Reaction Of Management Earnings Forecast Revisions In China

Posted on:2020-02-28Degree:MasterType:Thesis
Country:ChinaCandidate:S GaoFull Text:PDF
GTID:2439330575458467Subject:Finance
Abstract/Summary:PDF Full Text Request
The management earnings forecast revisions caused by the giant deviation between the previous management earnings forecast and the subsequent performance of listed companies is an important part of the information disclosure system of listed companies.It helps to reduce the information asymmetry inside and outside the company and improve the effectiveness of the securities market.There are no mandatory provisions in the management earnings forecast revisions of Listed companies in the United States and other western countries.Given the late-established and immature capital market in China,the regulatory authorities require that the disclosure of the management earnings forecast revisions is mandatory,the range of the expected performance accuracy should not exceed 50%,and the management earnings forecast revisions should be published before January 31 of the next year,so the management's information disclosure has more flexibility to choose independently.Compared with market investors,the management of listed companies has a more comprehensive and objective understanding of the company's operating status,and the correction degree of the management earnings forecast revisions is essentially clear-minded.Based on the principal-agent theory,in order to maximize their own interests,managers are prone to generate the idea of game with the market.The managers of listed companies are motivated to make use of information advantages,adopt the tendentious disclosure strategy,selectively abide by the "soft constraints" of expected performance accuracy and revised announcement time,and try their best to whitewash the revised announcement in order to seek advantages and avoid disadvantages.Faced with the elaborate amendment announcement issued by management,market investors with information disadvantage will interpret the disclosure strategy by themselves and trigger stock price fluctuation by trading behavior.Among all the means of the management's disclosure strategy,the expected performance accuracy and the date of the revised announcement can be more intuitively reflected in front of investors.Investors then tap out the information that they think is "good" or "bad" to guide their investment decisions.According to the theory of loss aversion,the subjective effect of bad news is about twice that of good news.Therefore,the "good" and "bad" news will lead to the difference of investors' beliefs,and then trigger the asymmetry of the market reaction of good news and bad news.After experiencing many game of information interpretation with management,investors can understand the intention of the management to a certain extent,even though they are in information disadvantage.Therefore,under the condition of asymmetric information,how can management use the limited constraints of the system to choose the disclosure strategy of the management earnings forecast revisions?Can investors see through the intentions of management disclosure strategy and use stock price fluctuations to reflect it?The research on this issue will help to improve the management earnings forecast system and improve the efficiency of resource allocation in the stock market.To this end,the paper studies the disclosure strategy and market reaction of management earnings forecast revision based on the practice of listed companies in China from 2007 to 2017 with the method of event study and multivariate regression.At the same time,the paper divides the good news into "more positive","from negative to positive" and "negative weakened".The bad news is divided into "more negative","from positive to negative " and "positive weakened",in order to clarify the management disclosure strategy and market reaction under the sample segmentation.The results show:(1)when the forecast revision is a good news compared with the early forecast,the management inclines to release forecast revision of higher precision early,otherwise,the reverse.(2)When the forecast revision is positive,the precision of the earnings forecast has a negative effect on the market reaction of the forecast revision,and the market reaction of the forecast revision which releases later than January 1st is fiercer.When the forecast revision is negative,the market reaction of the forecast revision with lower precision released after the end of the fiscal year is fiercer.The investors can see through the release strategy of the management in a degree.(3)Further study shows that,the management discloses the lowest accuracy of expected performance when "more negative" and the highest accuracy when "negative weakened";the earliest disclosure of revised announcement is when "from negative to positive" and the latest disclosure of revised announcement is when "positive weakened" Based on these,the paper puts forward some suggestions to improve the management earnings forecast revision from the dimension of securities regulatory authorities.
Keywords/Search Tags:Management, Management Earnings Forecast, Forecast Revision, Disclosure Strategy, Market Reaction
PDF Full Text Request
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