The authors thank Michael Bradbury, Paul Dunmore, David Emanuel, Natalie Gallery, Stephen Taylor, Jilnaught Wong, Norman Wong and seminar participants at Queensland University of Technology, Massey University and the University of Auckland for their helpful comments. Special thanks to Peter Clarkson and two anonymous reviewers whose suggestions have considerably improved the paper.
Public regulatory reform and management earnings forecasts in a low private litigation environment
Article first published online: 10 NOV 2010
© 2010 The Authors. Accounting and Finance © 2010 AFAANZ
Accounting & Finance
Volume 51, Issue 2, pages 437–465, June 2011
How to Cite
Dunstan, K., Gallery, G. and Truong, T. P. (2011), Public regulatory reform and management earnings forecasts in a low private litigation environment. Accounting & Finance, 51: 437–465. doi: 10.1111/j.1467-629X.2010.00376.x
- Issue published online: 2 MAY 2011
- Article first published online: 10 NOV 2010
- Received 27 July 2009; accepted 29 July 2010 by Peter Clarkson (Deputy Editor).
- Public regulatory reform;
- Private litigation;
- Continuous disclosure;
- Management earnings forecasts
We examine the impact of continuous disclosure regulatory reform on the likelihood, frequency and qualitative characteristics of management earnings forecasts issued in New Zealand’s low private litigation environment. Using a sample of 720 earnings forecasts issued by 94 firms listed on the New Zealand Exchange before and after the reform (1999–2005), we provide strong evidence of significant changes in forecasting behaviour in the post-reform period. Specifically, firms were more likely to issue earnings forecasts to pre-empt earnings announcements and, in contrast to findings in other legal settings, those earnings forecasts exhibited higher frequency and improved qualitative characteristics (better precision and accuracy). An important implication of our findings is that public regulatory reforms may have a greater benefit in a low private litigation environment and thus add to the global debate about the effectiveness of alternative public regulatory reforms of corporate requirements.