The Impact of New Zealand’s Statutory-Backed Continuous Disclosure Regime on Corporate Disclosure Behaviour

Working Papaer No. 63

42 Pages Posted: 26 Apr 2012

See all articles by Keitha L. Dunstan

Keitha L. Dunstan

Bond University - School of Business

Gerry Gallery

Queensland University of Technology

Thu Phuong Truong

Victoria University of Wellington - Te Herenga Waka

Date Written: September 2008

Abstract

Since December 1st, 2002, the New Zealand Stock Exchange’s (NZX) continuous disclosure listing rules have operated with statutory backing. To test the effectiveness of the new corporate disclosure regime, we compare the change in quantity (frequency), quality (precision and accuracy), and timeliness (horizon) of earnings guidance in NZX disclosures before and after the introduction of statutory backing. Our results provide qualified support for the effectiveness of statutory sanctions. Disclosure frequency has significantly improved; however, a large number of material changes in periodic earnings are either not pre-empted by an earnings forecast or are only pre-empted by an earnings forecast made in conjunction with a routine announcement. In the post-statutory sanctions period, disclosure quality significantly improves in terms of forecast precision and accuracy but at the expense of a decline in forecast horizon, and many forecasts remain qualitative in nature. While these results suggest that the impact of regulatory reforms falls short of the continuous disclosure culture envisaged by New Zealand corporate regulators, the observed positive changes in managers’ forecasting behaviour have been achieved in the absence of strong enforcement action. These findings have important implications for corporate regulators in their search for a superior corporate disclosure regime.

Keywords: continuous disclosure, management earnings forecasts, corporate regulation, statutory sanctions

JEL Classification: G1, K22

Suggested Citation

Dunstan, Keitha L. and Gallery, Gerry Thomas and Truong, Thu Phuong, The Impact of New Zealand’s Statutory-Backed Continuous Disclosure Regime on Corporate Disclosure Behaviour (September 2008). Working Papaer No. 63, Available at SSRN: https://ssrn.com/abstract=2046349 or http://dx.doi.org/10.2139/ssrn.2046349

Keitha L. Dunstan

Bond University - School of Business ( email )

Gold Coast, QLD 4229
Australia

Gerry Thomas Gallery

Queensland University of Technology ( email )

School of Accountancy GPO 2434
Brisbane QLD 4001
Australia
61738648347 (Phone)

Thu Phuong Truong (Contact Author)

Victoria University of Wellington - Te Herenga Waka ( email )

P.O. Box 600
Wellington, 6140
New Zealand
64 4 463 5233 (ext 8961) (Phone)
64 4 463 5076 (Fax)

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