Mandatory vs. voluntary disclosure of management forecast in China

ABSTRACT

This study examines the difference in management forecast quality under mandatory vs. voluntary disclosure in China’s stock markets in terms of management forecasting error (MFE) and value relevance. The results of MFE tests reveal that the disclosure approach is significantly associated with forecast accuracy, and voluntarily disclosed forecasts are more accurate than mandatorily disclosed forecasts. In terms of value relevance, the results are also consistent with the belief that in China’s stock markets, management forecast quality under voluntary disclosure is higher than that under mandatory disclosure.

KEYWORDS:

• Mandatorily disclosed forecasts
• voluntarily disclosed forecasts
• management forecast quality
• management forecast error
• value relevance

Acknowledgement

We thank Jiro Nemoto, Akihiro Noguchi for their insights on an earlier version of this paper. Our paper has benefited from the insightful comments from an anonymous reviewer, editors, participants at the 8th Conference of the World Accounting Frontiers Series (WAFS), and various seminars and conferences. Hu Dan Semba appreciates the support from Japan Society for the Promotion of Science(JSPS) KAKENHI Grant Numbers: JP 18K01932, JP 16KK0078.

Disclosure statement

No potential conflict of interest was reported by the authors.

Correction Statement

This article has been republished with minor changes. These changes do not impact the academic content of the article.