Earnings forecast disclosures and their differential value relevance: a study of Australian IPOs.

The value relevance of earnings forecasts disclosed by initial public offerings is not clearly demonstrated in the literature. There also appears scope to further clarify the circumstances in which such relevance might be observed. This paper explores such circumstances and in particular, the extent to which forecast disclosure relevance might be better revealed. We reveal this through the analysis of sample subgroups partitioned according to other specific company characteristics pertinent to firm value. A sample of 300 IPOs was investigated and the results of the whole-sample analysis revealed no significant association between forecast disclosure and IPO value. This non-relevance persisted across sub-samples stratified by business size, retained ownership, growth prospects, underwriter use, auditor quality, listing delay, market activity and industry. However, earnings forecast disclosures were value relevant in the case of IPOs by younger businesses. The results also revealed the persistent value relevance of several key variables across diverse sub-samples and reiterate their importance as control variables. A degree of interaction amongst several other variables, normally considered of interest in the value relevance literature, was also indicated. This is consistent with the proposition that investors place quite different degrees of reliance upon particular factors, depending upon the particular IPO context, with the presence and dominance of some variables serving to moderate the importance of others in each context