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Forecast accuracy in initial public offerings and the impact of external constraints relative to managerial choice: a research note
Author(s) -
Ismail Norashikin,
Weetman Pauline
Publication year - 2007
Publication title -
accounting and finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.645
H-Index - 49
eISSN - 1467-629X
pISSN - 0810-5391
DOI - 10.1111/j.1467-629x.2007.00217.x
Subject(s) - optimism , prospectus , earnings , economics , econometrics , business , actuarial science , finance , psychology , social psychology
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.