Forecast accuracy in initial public offerings and the impact of external constraints relative to managerial choice: a research note |
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Authors: | Norashikin Ismail Pauline Weetman |
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Affiliation: | Faculty of Accountancy, Universiti Teknologi MARA, Shah Alam, 40450, Malaysia,; Department of Accounting and Finance, University of Strathclyde, Glasgow G4 0LN, UK |
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Abstract: | We examine the accuracy of earnings forecasts published in prospectuses, under conditions where external influences of state regulation and economic condition act as constraints to mitigate management optimism. Our results indicate that regulation has no significant impact, but economic condition and management optimism are significantly associated with forecast accuracy. We conclude that a study of forecast accuracy over time must take into account external influences and that attempting to use regulation to improve forecast accuracy is not an effective strategy when there are strongly adverse economic conditions and when promoters or managers are optimistic in forecasting. |
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Keywords: | Economic condition Forecast accuracy Initial public offering Profit forecast Regulation |
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