Accuracy of Forecast Information Disclosed in the IPO Prospectuses of Hong Kong Firms
Posted: 27 Apr 1998
Date Written: Undated
Hong Kong investors as well as international investors would be interested to know how accurate are the forecasts disclosed in the Initial Public Offering (IPS) prospectuses issued by Hong Kong companies. This study has examined bias as well as accuracy of IPO forecasts disclosed from 1990 to 1994.The results of the study show that unlike IPO forecasts disclosed in most other countries, IPO forecasts disclosed by Hong Kong companies do not overestimate their earnings. Instead, the bias seems to be toward underestimation of earnings. The level of forecast accuracy is also quite high and compares favorably with that of most other countries. The results show that the level of accuracy to some extent is influenced by the company's age, i.e., how many years the company has been in business. No other firms-specific variable seems to have any influence on the accuracy level. On an overall basis, the findings of this study can be interpreted to mean the IPO forecasts disclosed by Hong Kong companies provide reliable information.
JEL Classification: M41, G24
Suggested Citation: Suggested Citation