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The accuracy of earnings forecasts in IPO prospectuses on the Kuala Lumpur stock exchange
journal contribution
posted on 2023-06-08, 19:16 authored by Ranko JelicRanko Jelic, Brahim Saadouni, Richard BristonThis paper examines the accuracy of earnings forecasts made by managers of Malaysian initial public offerings (IPOs) during the period 1984-1995. It is a mandatory requirement for Malaysian IPOs to furnish earnings forecasts together with the opinions thereon of the auditors and the lead underwriter in their prospectuses. Their accuracy is measured by forecast errors, absolute forecast errors, squared forecast errors and standardised forecast errors. The results suggest that, on average, managers under-forecast earnings by 33.37%. A comparison with the naive no change model in earnings suggests that 96 Out of 122 companies outperform this model. A number of company specific characteristics (size, age, forecast interval, gearing, proportion of shares retained by owners, auditor reputation and industry) are tested. The results reveal that both the age and industry classification of the company are statistically significant, and that management earnings forecasts are particularly inaccurate where firms experience a decline in earnings.
History
Publication status
- Published
Journal
Accounting and Business ResearchISSN
0001-4788Publisher
Taylor & FrancisExternal DOI
Issue
1Volume
29Page range
57-72Department affiliated with
- Business and Management Publications
Full text available
- No
Peer reviewed?
- Yes
Legacy Posted Date
2014-12-15Usage metrics
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