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The Effects of the Information Disclosure and Evaluation System on Analysts' Forecasts
Chun - Ju Fang,
Tunghai University Taiwan
Ruey - Dang Chang, National Sun Yat - Sen University Taiwan
Yee - Chy Tseng, Tainan University of Technology Taiwan
ABSTRACT. Information transparency enhances corporate governance. In an attempt to reduce the information asymmetry between business insiders and outsiders and allow outsiders to have more information for decision making by disclosing more corporate information voluntarily, the Taiwan Stock Exchange (TSE) has requested the Securities and Futures Institute to implement an information disclosure and evaluation system for all publicly traded and OTC companies listed in TSE. This study investigates the effects of the system on decision behavior of the analysts. Empirical results indicate that analysts’ earnings forecasts are more accurate and the earnings forecast dispersion among the analysts decreases after the system has been implemented. Besides, the analysts’ earnings forecasts are more accurate for the “more transparent” companies. However, the differences of earnings forecast dispersion among analysts between the “more transparent” and “less transparent" companies are not significant.
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