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Levels of voluntary disclosure in IPO prospectuses : an empirical analysis

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Author Info
Jeanjean, Thomas ()
Cazavan-Jeny, Anne ()

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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 HEC Paris in its series Les Cahiers de Recherche with number 827.

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Length: 36 pages
Date of creation: 21 Dec 2005
Date of revision:
Handle: RePEc:ebg:heccah:0827

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Postal: HEC Paris, 78351 Jouy-en-Josas cedex, France
Web page: http://www.hec.fr/
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Related research
Keywords: IPO; forecast disclosure; forecast error;

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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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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  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. 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)
    Other versions:
  3. 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)
  4. 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)
  5. 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)
  6. Heckman, James J, 1979. "Sample Selection Bias as a Specification Error," Econometrica, Econometric Society, vol. 47(1), pages 153-61, January. [Downloadable!] (restricted)
  7. 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)
  8. 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)
  9. 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)
  10. 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)
  11. 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)
  12. 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)
  13. 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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  14. 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)
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