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Levels of voluntary disclosure in IPO prospectuses: an empirical analysis

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Author Info
Cazavan-Jeny , Anne () (ESSEC Business School)
Jeanjean, Thomas () (HEC School of Management)

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Abstract

This paper focuses on how forecasts information is disclosed in IPO prospectuses. In France, managers report either detailed forecasts or only a brief summary. We investigate the determinants and consequences of the varying levels of detail provided in these forecasts. Based on a sample of 82 IPOs on the Euronext Paris market (2000-2002), we show that only two variables are associated with highly detailed forecast disclosures: forecast horizon and firm age. We also find that the forecast error decreases as the level of detail in the forecast disclosures increases. This finding is robust to our reverse causality test (Heckman two-stage self-selection procedure) and suggests that the level of detail in forecast disclosures enhances the reliability of earnings forecasts.

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Publisher Info
Paper provided by ESSEC Research Center, ESSEC Business School in its series ESSEC Working Papers with number DR 06001.

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Length: 41 pages
Date of creation: Jan 2006
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Handle: RePEc:ebg:essewp:dr-06001

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Postal: ESSEC Research Center, BP 105, 95021 Cergy, France
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Related research
Keywords: IPO; Forecast disclosure; forecast error;

Other versions of this item:

Find related papers by JEL classification:
G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies
G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
M41 - Business Administration and Business Economics; Marketing; Accounting - - Accounting - - - Accounting

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  1. Mak, Y. T., 1994. "The voluntary review of earnings forecasts disclosed in IPO prospectuses," Journal of Accounting and Public Policy, Elsevier, vol. 13(2), pages 141-158. [Downloadable!] (restricted)
  2. Lee, Philip & Stokes, Donald & Taylor, Stephen & Walter, Terry, 2003. "The association between audit quality, accounting disclosures and firm-specific risk: Evidence from initial public offerings," Journal of Accounting and Public Policy, Elsevier, vol. 22(5), pages 377-400. [Downloadable!] (restricted)
  3. Hughes, Patricia J., 1986. "Signalling by direct disclosure under asymmetric information," Journal of Accounting and Economics, Elsevier, vol. 8(2), pages 119-142, June. [Downloadable!] (restricted)
  4. Heckman, James J, 1979. "Sample Selection Bias as a Specification Error," Econometrica, Econometric Society, vol. 47(1), pages 153-61, January. [Downloadable!] (restricted)
  5. Chen, Gongmeng & Firth, Michael & Krishnan, Gopal V., 2001. "Earnings forecast errors in IPO prospectuses and their associations with initial stock returns," Journal of Multinational Financial Management, Elsevier, vol. 11(2), pages 225-240, April. [Downloadable!] (restricted)
  6. T.Y. Cheng & Michael Firth, 2000. "An Empirical Analysis of the Bias and Rationality of Profit Forecasts Published in New Issue Prospectuses," Journal of Business Finance & Accounting, Blackwell Publishing, vol. 27(3-4), pages 423-446. [Downloadable!] (restricted)
  7. Mak, Y. T., 1996. "Forecast disclosure by initial public offering firms in a low-litigation environment," Journal of Accounting and Public Policy, Elsevier, vol. 15(2), pages 111-136. [Downloadable!] (restricted)
  8. Brown, Philip & Clarke, Alex & How, Janice C. Y. & Lim, Kadir, 2000. "The accuracy of management dividend forecasts in Australia," Pacific-Basin Finance Journal, Elsevier, vol. 8(3-4), pages 309-331, July. [Downloadable!] (restricted)
  9. Leland, Hayne E & Pyle, David H, 1977. "Informational Asymmetries, Financial Structure, and Financial Intermediation," Journal of Finance, American Finance Association, vol. 32(2), pages 371-87, May. [Downloadable!] (restricted)
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  10. T.Y. Cheng & Michael Firth, 2000. "An Empirical Analysis of the Bias and Rationality of Profit Forecasts Published in New Issue Prospectuses," Journal of Business Finance & Accounting, Blackwell Publishing, vol. 27(3&4), pages 423-446. [Downloadable!] (restricted)
  11. Firth, Michael, 1998. "IPO Profit Forecasts and Their Role in Signalling Firm Value and Explaining Post-listing Returns," Applied Financial Economics, Taylor and Francis Journals, vol. 8(1), pages 29-39, February. [Downloadable!] (restricted)
  12. Vijay Jog & Bruce J. McConomy, 2003. "Voluntary Disclosure of Management Earnings Forecasts in IPO Prospectuses," Journal of Business Finance & Accounting, Blackwell Publishing, vol. 30(1-2), pages 125-168. [Downloadable!] (restricted)
  13. Jaggi, Bikki, 1997. "Accuracy of forecast information disclosed in the IPO prospectuses of Hong Kong companies," The International Journal of Accounting, Elsevier, vol. 32(3), pages 301-319. [Downloadable!] (restricted)
  14. La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei & Vishny, Robert, 2000. "Investor protection and corporate governance," Journal of Financial Economics, Elsevier, vol. 58(1-2), pages 3-27. [Downloadable!] (restricted)
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