The value relevance of earnings forecast disclosures: an investigation of forecast attributes and signalling in the Australian IPO context

Evidence regarding the value relevance of corporate earnings forecast disclosures made during initial public offerings has not been consistent in the literature. This study considers several different attributes of an earnings forecast that might better determine the forecast's value relevance and which could therefore help to explain prior inconsistencies. These emphases include the forecast disclosure itself, the forecast size and the forecast interval. This study analyses forecast disclosures across a sample of 300 companies listing on the Australian Securities Exchange (ASX). Results indicate neither forecast disclosure nor forecast size to be discriminating factors of relevance and this contrasts with earlier studies. Differential value relevance was observed for forecasts with forecast intervals of less than 12 months, vis-a-vis other disclosures. This outcome provides evidence to suggest the dichotomous variable of forecast disclosure/nondisclosure used in prior studies might not always effectively proxy the change in information asymmetry or signalling effects typically proposed in the literature.