Voluntary profit forecast disclosures, IPO pricing revisions and after-market earnings drift

Paul B. McGuinness

International Review of Financial Analysis, 2016, vol. 46, issue C, 70-83

Abstract: Prospectus profit forecasts (PPF) constitute one of the most important discretionary disclosure items in an IPO. I examine such disclosures in the Hong Kong market, where both IPO activity and PPF disclosure rates are at high levels. The median forecast typically ‘underestimates’ future earnings by around 6%. More importantly, PPF disclosure exhibits a strong inverse association with pre-listing owners' retained equity levels (Hughes, 1986; and Li and McConomy, 2004). PPF disclosure is thus more likely in IPOs raising more capital and generating larger floats. I also demonstrate a strong link between PPF disclosure and post-IPO earnings drift.

Keywords: Prospectus profit forecasts; Earnings drift; Earnings forecast errors; Price revisions and ‘determinations’; Initial returns (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:46:y:2016:i:c:p:70-83

DOI: 10.1016/j.irfa.2016.04.005

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