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Impact of the Corporate Law Economic Reform Program Act 1999 on initial public offering prospectus earnings forecasts

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  • Larelle Chapple
  • Peter M. Clarkson
  • Christopher J. Peters

Abstract

Commencing 13 March 2000, the Corporate Law Economic Reform Program Act 1999 (Cth) introduced changes to the regulation of corporate fundraising in Australia. In particular, it effected a reduction in the litigation risk associated with initial public offering prospectus disclosure. We find that the change is associated with a reduction in forecast frequency and an increase in forecast value relevance, but not with forecast error or bias. These results confirm previous findings that changes in litigation risk affect the level but not the quality of disclosure. They also suggest that the reforms' objectives of reducing fundraising costs while improving investor protection, have been achieved.

Suggested Citation

  • Larelle Chapple & Peter M. Clarkson & Christopher J. Peters, 2005. "Impact of the Corporate Law Economic Reform Program Act 1999 on initial public offering prospectus earnings forecasts," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 45(1), pages 67-94, March.
    • Handle: RePEc:bla:acctfi:v:45:y:2005:i:1:p:67-94
    DOI: 10.1111/j.1467-629x.2004.00123.x
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    Cited by:

    1. Jacqueline Christensen & Pamela Kent & Tom Smith, 2016. "The decision to outsource risk management services," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 56(4), pages 985-1015, December.
    2. Li Chen & David Hay & Jingyuan Zhuang, 2020. "Initial public offering prospectus forecast errors and mandatory explanations: evidence from New Zealand," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 60(3), pages 2167-2202, September.
    3. Neil Hartnett, 2010. "The value relevance of earnings forecast disclosures: an investigation of forecast attributes and signalling in the Australian IPO context," Applied Financial Economics, Taylor & Francis Journals, vol. 20(23), pages 1819-1828.
    4. Peter Schelluch & Grant Gay, 2006. "Assurance provided by auditors’ reports on prospective financial information: implications for the expectation gap," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 46(4), pages 653-676, December.
    5. Karen Benson & Peter M Clarkson & Tom Smith & Irene Tutticci, 2015. "A review of accounting research in the Asia Pacific region," Australian Journal of Management, Australian School of Business, vol. 40(1), pages 36-88, February.
    6. Sosnowski Tomasz & Wawryszuk-Misztal Anna, 2019. "Board characteristics and earnings forecasts accuracy in IPO prospectuses," International Journal of Management and Economics, Warsaw School of Economics, Collegium of World Economy, vol. 55(1), pages 25-39, March.
    7. Norashikin Ismail & Pauline Weetman, 2007. "Forecast accuracy in initial public offerings and the impact of external constraints relative to managerial choice: a research note," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 47(3), pages 513-525, September.
    8. Jean Bédard & Daniel Coulombe & Lucie Courteau, 2016. "The Credibility of Earnings Forecasts in IPO Prospectuses and Underpricing," Accounting Perspectives, John Wiley & Sons, vol. 15(4), pages 235-267, December.
    9. Carey, Peter & Fang, Victor & Zhang, Hong Feng, 2016. "The role of optimistic news stories in IPO pricing," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 41(C), pages 16-29.
    10. Millicent Chang & Andrew B. Jackson & Marvin Wee, 2018. "A review of research on regulation changes in the Asia‐Pacific region," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 58(3), pages 635-667, September.

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