Does disclosure of earnings forecasts regulation affect the valuation of IPOs? Evidence from an emerging country

Chui Zi Ong, Rasidah Mohd-Rashid, Waqas Mehmood and Ahmad Hakimi Tajuddin

Asian Review of Accounting, 2021, vol. 29, issue 4, 558-578

Abstract: Purpose - This paper aimed to explore the effect of a regulatory change pertaining to earnings forecasts disclosure from a mandatory to a voluntary regime on the valuation of Malaysian initial public offerings (IPOs). Design/methodology/approach - The study employed ordinary least square (OLS) regression and quantile regression to analyse the impact of disclosure of earnings forecasts regulation on the valuation of IPOs which comprised 458 IPOs reported for the period 2000–2017 on Bursa Malaysia. Findings - This paper revealed that the regulatory change in forecasted earnings disclosure from a mandatory to a voluntary regime, effective from 1 February 2008, had a negative impact on the valuation of IPOs. The regime change did not improve the transparency of firms issuing IPOs. In fact, the absence of forecasted earnings information in most IPO prospectuses causedex anteuncertainties to increase. Voluntary disclosure, however, had a significant positive relationship with the valuation of the IPOs issued during the global financial crisis period (2008–2010). Firms concealed their poor qualities by excluding forecasted earnings information from their prospectuses in order to have a fair valuation. Practical implications - The findings may be used by policymakers as guidance in improving the existing regulation regarding the disclosure of forecasted earnings. Originality/value - This paper provides new insight on the effect of a regulatory change pertaining to earnings forecasts disclosure from a mandatory to a voluntary regime on the valuation of Malaysian IPOs. It also provides evidence that the regulatory change of earnings forecast disclosure affects the IPOs' values listed during the global financial crisis period.

Keywords: Earnings forecasts; IPOs; Mandatory disclosure; Valuation; Voluntary disclosure (search for similar items in EconPapers)
Date: 2021
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (text/html)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (application/pdf)
Access to full text is restricted to subscribers

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eme:arapps:ara-09-2020-0142

DOI: 10.1108/ARA-09-2020-0142

Access Statistics for this article

Asian Review of Accounting is currently edited by Prof. Haiyan Zhou

More articles in Asian Review of Accounting from Emerald Group Publishing Limited
Bibliographic data for series maintained by Emerald Support ().