Title

Public regulatory reform and management earnings forecasts in a low private litigation environment

Date of this Version

6-1-2011

Document Type

Journal Article

Publication Details

Citation only.

Dunstan, K., Gallery, G. & Truong, T. P. (2011). Public regulatory reform and management earnings forecasts in a low private litigation environment. Accounting and finance, 51(2), 437-465.

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2011 HERDC submission. FoR code: 150103

© Copyright The Authors, 2010

ISSN

0810-5391

Abstract

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.

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This document has been peer reviewed.