Intangibles and management earnings forecasts

We investigate how the accounting treatment of intangible assets on managers’likelihood of issuing voluntary earnings guidance(MEF).We find that unrecognized intangibles(immediately expensed)are negatively associated with MEF issuance,while recognized intangibles(capitalized)show a positive association.These findings hold across various factors such as analysts’coverage,industry type and for a subsample that excludes software firms permitted to capitalize software development costs under SFAS No.86.In additional,we investigate the cross-sectional determinants of MEF issuance based on the characteristics of firm intangibility.We find a significant increase in the likelihood of MEF issuance for higher unrecognized intangibles with greater earnings uncertainty.This suggests that managers may prioritize delivering valuerelevant information to market participants to alleviate uncertainty.

Earnings seasonality,management earnings forecasts and stock returns

We examine whether management earnings forecasts(MEFs)help reduce the stock return seasonality associated with earnings seasonality around earnings announcements(EAs)in Chinese A-share markets.We find that firms in historically low earnings seasons outperform firms in high earnings seasons by 2.1%around MEFs.Firms in low earnings seasons also have higher trading volume and return volatility than their counterparts around EAs and MEFs.MEFs significantly reduce the ability of historical seasonal earnings rankings to negatively predict announcement returns,volume and volatility around EAs.The reduction effects are stronger when MEFs are voluntary or made closer to EAs.The evidence suggests that MEFs facilitate the correction of investors’tendency to extrapolate earnings seasonality and its resulted stock mispricing.

Business and financial information integration and voluntary management earnings forecasts

In this study,the impact of business and financial information integration(BFⅡ)on the voluntary management earnings forecasts(VMEFs)of listed firms in China between 2008 and 2018 is investigated.Drawing on litigation cost and ability signaling theories,we find that the adoption of BFⅡencourages top managers to disclose VMEFs.BFⅡfirms are identified through the textual analysis of management discussion and analysis(MD&A)reports,and the empirical results indicate that BFⅡfirms have a higher probability and frequency of issuing VMEFs than non-BFⅡfirms.The results remain robust after we identify causality by applying a propensity score matching and difference-in-differences(PSM-DID)test and use an alternate measure of BFⅡ.Further tests show that BFⅡfirms issue more accurate VMEFs and are able to issue them at an earlier stage.We also find that the positive relationship between BFⅡand VMEFs is weakened if the media expresses concern about the uncertainty of BFⅡadoption.

Enforcement actions and their effectiveness in securities regulation:Empirical evidence from management earnings forecasts

Due to resource constraints,securities regulators cannot find or punish all firms that have conducted irregular or even illegal activities(hereafter referred to as fraud).Those who study securities regulations can only find the instances of fraud that have been punished,not those that have not been punished,and it is these unknown cases that would make the best control sample for studies of enforcement action criteria.China's mandatory management earnings forecasts solve this sampling problem.In the A-share market,firms that have not forecasted as mandated are likely in a position to be punished by securities regulators or are attempting to escape punishment,and their identification allows researchers to build suitable study and control samples when examining securities regulations.Our results indicate that enforcement actions taken by securities regulators are selective.The probability that a firm will be punished for irregular management forecasting is significantly related to proxies for survival rates.Specifically,fraudulent firms with lower return on assets(ROAs) or higher cash flow risk are more likely to be punished.Further analysis shows that selective enforcement of regulations has had little positive effect on the quality of listed firms' management forecasts.

Customer concentration and management earnings forecast

Customers are one of the key external stakeholders for a company.Using Chinese listed companies’data from 2007 to 2015,this paper examines the impact of customer concentration on information disclosure from the perspective of management earnings forecast.Empirical results show that a more concentrated customer base induces companies to disclose more positive earnings forecast.In addition,the positive association between customer concentration and management earnings forecast is more pronounced with higher economic policy uncertainty.Further analyses reveal that companies issue more positive earnings forecast to reduce the financing risk and protect their relationshipspecific investment.Also,customer concentration reduces the consistency of earnings forecast since the deviation of the forecast performance and the actual performance is greater.This paper enriches the literature on the determinants of management earnings forecast and the effects of stakeholders on corporate financial behaviour.Our findings also provide implications for investors,regulators,and various stakeholders to understand management earnings forecast decisions.

Major government customer and management earnings forecasts

This paper examines whether customer base composition in the US,that is,whether a firm's major customers are government entities or publicly traded companies,affects the properties of its management earnings forecasts(MEFs).Using a sample of 1,168 MEFs from 1998 to 2014,we find that firms whose major customers are government entities(i.e.,govemment suppliers)issue more precise and more accurate MEFs than firms whose major customers are public companies(i.e.,corporate suppliers).Moreover,when managers disclose negative information to the market,earnings forecasts issued by government suppliers have greater price impact than those issued by corporate suppliers.Collectively,our empirical results suggest that having major govemment customers has a positive impact on the quality of MEFs.