The Impact of Securities Litigation Reform on the Disclosure of Forward-Looking Information by High Technology Firms

53 Pages Posted: 16 Feb 1998

See all articles by Marilyn F. Johnson

Marilyn F. Johnson

Michigan State University - Department of Accounting & Information Systems

Ron Kasznik

Stanford Graduate School of Business

Karen K. Nelson

Texas Christian University - Department of Accounting

Multiple version iconThere are 2 versions of this paper

Date Written: January 1, 1998

Abstract

This study evaluates corporate voluntary disclosure of forward-looking information under the safe harbor provision of the Private Securities Litigation Reform Act of 1995. Using data on earnings and sales forecasts issued by 547 computer, software, and drug firms, we find that there was a significant increase in both the frequency of firms issuing forecasts and the number of forecasts issued following enactment of the Reform Act. The increased level of disclosure is primarily attributable to managers issuing more long horizon forecasts of good news and short horizon forecasts of bad news. Moreover, there is some evidence that the forecasts issued after the safe harbor took effect specified a more precise estimate of expected future earnings performance. We also find that the increase in disclosure was not at the expense of forecast quality in that forecasts issued after passage of the Reform Act are no less accurate than those issued previously. In particular, there is no evidence to support critics' concern that the protection of the safe harbor would prompt managers to issue more overly optimistic statements to investors.

JEL Classification: M41, M43, K22

Suggested Citation

Johnson, Marilyn F. and Kasznik, Ron and Nelson, Karen K., The Impact of Securities Litigation Reform on the Disclosure of Forward-Looking Information by High Technology Firms (January 1, 1998). Available at SSRN: https://ssrn.com/abstract=59248 or http://dx.doi.org/10.2139/ssrn.59248

Marilyn F. Johnson

Michigan State University - Department of Accounting & Information Systems ( email )

270 North Business Complex
East Lansing, MI 48824-1034
United States
517-432-0152 (Phone)
517-432-1101 (Fax)

Ron Kasznik

Stanford Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States
650-725-9740 (Phone)
650-725-6152 (Fax)

Karen K. Nelson

Texas Christian University - Department of Accounting ( email )

M.J. Neeley School of Business
TCU Box 298530
Fort Worth, TX 76129
United States
817-257-7567 (Phone)

Register to save articles to
your library

Register

Paper statistics

Downloads
553
rank
47,437
Abstract Views
4,177
PlumX Metrics