| Summary: | 博士 === 國立中山大學 === 財務管理學系研究所 === 99 === Starting from 2005 the disclosure of financial forecast for Taiwanese public companies has not been mandatory, firms can decide whether they want to disclose, and if so, how and when to disclose. How does the investor''s reaction affect this decision? Furthermore, what is the trade-off between transparency and precision? This study develops a theoretical model in which the voluntary disclosure of earnings forecast is a double-edged sword. Such disclosure may reduce information asymmetry, but simultaneously allows entrepreneurs to hype the stock. The proposed model assumes that insiders might manipulate information and investors can learn with bounded rationality. The analytical results demonstrate that entrepreneurs may forgo earnings forecast disclosure if they can achieve greater profit under non-disclosure. In the multiperiod case, this study shows that insiders would reduce their forecast manipulation behavior due to the cost of forecast error and diminishing marginal expected profit. This study accommodates an explanation of the decrease in voluntary disclosure and the popularity of investor conferences in Taiwan. The inferences of the proposed model are examined based on forecasts issued by Taiwanese listed firms. The empirical results evidence a positive relationship between insiders’ trading profit and manipulation of earnings forecast. Additionally, insiders’ trading profit regarding forecast revisions is greater under voluntary disclosure than mandatory disclosure. This study offers important insights into earnings forecast policy in emerging markets.
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