경영자 예측정보공시와 주가표류현상 = Effects of Management Forecasts on Post Earnings Announcement Drift

다국어 초록 (Multilingual Abstract)

This paper investigates how the voluntary disclosure in the form of management forecasts of future performance affect on Post-earnings announcement drift (PEAD). PEAD refers to the phenomenon that stock prices continue to move in the direction of the earnings surprise even after the earnings announcement date. It has been considered as one of the most puzzling market anomalies. Our first research question is that whether PEAD is less pronounced for firm-quarters with management forecasts than for firm-quarters without management forecasts. Management forecast is the voluntary managerial disclosure which predicts the firm`s future performance prior to the reporting date. This has been reported after Regulation Fair Disclosure adopted in 2002. We predict that release of management forecasts of future performance will lessen information asymmetry and uncertainty, and can accelerate investor`s response to the implications of announced earnings for future earnings, thereby reducing PEAD. Further, we examine that the mitigation effect of management forecasts on PEAD is more pronounced for firm-quarters with high information uncertainty companies. High information uncertainty companies refer to the firms whose expected cash flows are less knowable, perhaps due to the nature of their business or operating environment, and prior research contends that these firms are correlated to high drifts. As management forecasts will be regarded as more precious and useful information to investors in high information uncertainty firms, mitigation effect will be stronger in these companies. Next, we investigate whether the mitigation effect of management forecasts on PEAD varies with the accuracy of management forecasts and forecast horizon. To be more accurate, it means that the absolute value between actual earnings and management forecast is less. Horizon refers to the number of calendar days from the management forecast date to the earnings announcement date. Prior research suggest that a longer management forecast horizon corresponds to greater uncertainty faced by managers in forecasting earnings. Thus, the shorter the horizon, the more accurate management`s forecast will be. Our sample consists of 855 firm-years over 2004-2008 period. The findings of the study are as follows: First, consistent with our prediction, observed relation between announced earnings surprises and subsequent abnormal returns are reduced by the issuance of management forecasts. Also, this mitigation effect is prominent in high information uncertainty companies. These findings suggest that management forecasts increase the transparency of firm`s earnings process and provides valuerelevant information to the investors, thereby reducing PEAD. In order to test for the relationship between the mitigation effect and the accuracy of management forecasts and forecast horizon, we used sub-sample of 330 firmquarters which have provided at least one management forecast. We find that the mitigation effect of management forecasts on PEAD is smaller for firm-quarters with forecasts with more accurate and short forecast horizon. As management forecasts are voluntary and unaudited disclosures in which managers have substantial discretion, investors` reaction is different followings to its accuracy and horizon. This study has several contributions. First, by providing empirical evidence on the effectiveness of voluntary disclosures in alleviating the accounting anomaly of PEAD, this study contributes to the literature on both PEAD and voluntary disclosure. Second, our findings suggest that PEAD which occurs from investors` incomplete and delayed response to earnings news can be mitigated by management forecasts. Academic literature offers several explanations for why PEAD occurs and persists. Of all, our results support the view that investors underreact to the information conveyed during earnings announcement, or they process the information only after a delay. Lastly, we also show the evidence that mitigation effect of management forecasts varies with information uncertainty and quality of management forecasts. This can provide direct implications for managers, regulators, and investors.

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