This paper assesses the ability of markets to convey information about firms to investors. The present system of disclosure rules has been restricted to historical data. Recently there have been proposals to bring predictive data—in particular, earnings forecasts—under the scope of a disclosure rule. Forecasts of future earnings are, at present, being provided by many corporate managements. One reason for the demand for a forecast disclosure rule is, presumably, the belief that managements possess "inside" information about future earnings and that this information is not being made fully available to investors through voluntary mechanisms. This paper examines the voluntary forecast disclosure with a view to providing evidence relevant to these arguments. Specifically, the paper addresses two issues. First, do earnings forecasts published voluntarily convey information to investors about the firms which publish them? And, second, do investors receive forecast information potentially available from all firms?
Penman, Stephen. "An Empirical Investigation of the Voluntary Disclosure of Corporate Earnings Forecasts." Journal of Accounting Research 18, no. 1 (Spring 1980): 132-160.
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