The Impact of Forecast Disclosure and Accuracy on Equity Pricing: An IPO Perspective

31 Pages Posted: 25 May 2001

See all articles by Julian Yeo

Julian Yeo

Columbia University - Accounting

Janice C. Y. How

Queensland University of Technology; Financial Research Network (FIRN)

Multiple version iconThere are 2 versions of this paper

Date Written: 2001


In a relatively less litigious environment like Australia, it is common to find IPO firms that voluntarily provide forecasts in their prospectus. Using 158 Australian industrial IPOs listed from 1991 to 1997, we examine the impact of the disclosure and accuracy of earnings and dividend forecasts on equity pricing. Our results show that IPO firms' disclosure policy is not related to their initial and long-run valuation. However, the market appears to price managers' ability to forecast: firms with inaccurate earnings and dividend forecasts, especially those that fall short of their forecasts, experience adverse price reactions surrounding the day when the actual figures are released. Our results also show a significant relationship between forecast errors and IPO firms' post-listing performance. Further analysis shows that this relationship is driven mainly by the announcement effect.

Keywords: Forecast accuracy, IPOs, initial market valuation, announcement effects, long-run performance

JEL Classification: G14, G12, G28

Suggested Citation

Yeo, Julian and How, Janice C. Y., The Impact of Forecast Disclosure and Accuracy on Equity Pricing: An IPO Perspective (2001). Available at SSRN: or

Julian Yeo

Columbia University - Accounting ( email )

3022 Broadway
New York, NY 10027
United States

Janice C. Y. How (Contact Author)

Queensland University of Technology ( email )

2 George Street
Brisbane, Queensland 4000

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane


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