Abstract: This paper investigates the effect of analysts´ forecasts on management earnings forecasts in the unique Chinese forecasting environment. The empirical results show that: a pessimistic bias in analysts´ forecasts encourages listed companies to disclose their earnings forecasts more accurately and on time in order to correct market expectations of earnings; managers make more precise forecasts when the dispersion of analysts´ forecasts is wider. The results imply that analysts´ forecasts have a great impact on management earnings forecasts, which are not only influenced by government, but also affected by other market participants. This paper sheds new light on the research into the relationship between analysts´ forecasts and management earnings forecasts in China, as well as helps the government to acquire a better understanding of the effects of analysts on management forecasting behaviour so as to be able draw up more efficient information disclosure policies.
Authors: Xiaobei Huang, Jianming Zheng
Keywords: Management earnings forecasts, analysts´ forecasts, mandatory disclosure, voluntary forecasts