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Forecast accuracy in initial public offerings and the impact of external constraints relative to managerial choice: a research note

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  • Norashikin Ismail
  • Pauline Weetman

Abstract

We examine the accuracy of earnings forecasts published in prospectuses, under conditions where external influences of state regulation and economic condition act as constraints to mitigate management optimism. Our results indicate that regulation has no significant impact, but economic condition and management optimism are significantly associated with forecast accuracy. We conclude that a study of forecast accuracy over time must take into account external influences and that attempting to use regulation to improve forecast accuracy is not an effective strategy when there are strongly adverse economic conditions and when promoters or managers are optimistic in forecasting.

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  • Norashikin Ismail & Pauline Weetman, 2007. "Forecast accuracy in initial public offerings and the impact of external constraints relative to managerial choice: a research note," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 47(3), pages 513-525, September.
    • Handle: RePEc:bla:acctfi:v:47:y:2007:i:3:p:513-525
    DOI: 10.1111/j.1467-629X.2007.00217.x
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    Cited by:

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    2. Jafni Hashim & Mohd Nizal Haniff & Ibrahim Kamal Abdul Rahman, 2012. "Tax waiver year effect on earnings management practices in Malaysia," Journal of Financial Reporting and Accounting, Emerald Group Publishing Limited, vol. 10(2), pages 171-189, October.
    3. Li Chen & David Hay & Jingyuan Zhuang, 2020. "Initial public offering prospectus forecast errors and mandatory explanations: evidence from New Zealand," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 60(3), pages 2167-2202, September.

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