Mandatory disclosure of comment letters and analysts' forecasts |
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| Institution: | 1. School of Accountancy, Southwestern University of Finance and Economics, 555 Liutai Road, Chengdu, China;3. Institute of Accounting and Finance, Shanghai University of Finance and Economics, 111 Wuchuan Road, Shanghai, China;1. Jindal Global Business School, OP Jindal Global University, Sonipat, Haryana, India;2. Indian Institute of Management Kashipur, Kundeshwari, Kashipur, District- Udham Singh Nagar, Uttarakhand-244713, India;3. Amrita School of Business, Coimbatore, Amrita Vishwa Vidyapeetham, India.;1. Business School, Zhengzhou University of Aeronautics, China;2. School of Accounting, Guangdong University of Finance, China;3. Center for Accounting, Finance and Institutions, School of Business, Sun Yat-sen University, China;4. School of Management, Xiamen University, China;1. Central University of Finance and Economics, China;2. School of Business, University of Wollongong, Australia;1. Bucharest University of Economic Studies, Bucharest, Romania;2. National Scientific Research Institute for Labour and Social Protection, Department of Education, Training and Labour Market, Bucharest, Romania;3. Institute for Economic Forecasting, Romanian Academy, Bucharest, Romania;1. School of International Economics and Trade, Nanjing University of Finance and Economics, Nanjing, China;2. Rotman Commerce, University of Toronto, Toronto, Canada;3. SHU-UTS SILC Business School, Shanghai University, 99 Shangda Road, Shanghai, China |
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| Abstract: | Comment letters (CLs) have been adopted as the main supervision mechanism for information disclosure by the two main Chinese stock exchanges since 2013. Both CLs and firms' responses have been publicly disclosed since the end of 2014. Using nonfinancial listed firms from 2013 to 2019 as our sample, we investigate the impact of CLs and their mandatory disclosure on analysts' forecast quality. The results show that, in the pre-disclosure period, there is no significant relation between CLs and analysts' forecast quality. However, in the post-disclosure period, CLs are positively (negatively) correlated with analysts' forecast accuracy (optimism). The quality of analysts' forecasts is much higher when CLs contain more questions. In addition, the impact of CLs is larger for samples with a lower percentage of star analysts or samples with higher earnings volatility. CL recipients tend to disclose more information on their internal and external risks, which can offer additional information to analysts. |
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