Voluntary Disclosure of Management Earnings Forecasts in IPO Prospectuses (ABSTRACT)
Jog, V., & McConomy, B.
published: 2003 | Research publication | Refereed Journals - Accounting
Jog, V., & McConomy, B. (2003). "Voluntary Disclosure of Management Earnings Forecasts in IPO Prospectuses". Journal of Business, Finance & Accounting, 30(1)(2), pp. 125-167.
ABSTRACT: Asymmetric information and mechanisms for its resolution in the IPO process are subjects of extensive research and debate. This study investigates the impact of one such mechanism, namely voluntary disclosure of management earnings forecasts by issuers of Canadian IPOs, as a means of reducing asymmetric information as well as ex ante uncertainty. The study's focus is on the relative importance of this voluntary disclosure mechanism on both IPO underpricing and post-issue return performance. Results indicate that management earnings forecasts provide important and incremental information compared to other means of reducing asymmetric information, and these disclosures appear to improve the environment of IPO issuance. The underpricing results show that firms that choose to provide forecasts leave "less money on the table" with a lower degree of underpricing. In terms of post-issue performance, firms whose forecasts turn out to be optimistic are penalized significantly relative to other forecasters and non-forecasters.
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revised Jan 18/06
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