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The Influence of Corporate Governance on Management Earnings Forecast Behaviour in a Low Private Litigation Environment

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dc.contributor.author Truong, Thu Phuong
dc.contributor.author Dunstan, Keitha
dc.date.accessioned 2012-05-02T03:32:42Z
dc.date.accessioned 2022-07-05T02:33:40Z
dc.date.available 2012-05-02T03:32:42Z
dc.date.available 2022-07-05T02:33:40Z
dc.date.copyright 2011
dc.date.issued 2011
dc.identifier.uri https://ir.wgtn.ac.nz/handle/123456789/18658
dc.description.abstract We examine the influence of three external corporate governance mechanisms – continuous disclosure regulatory reform, analyst following and ownership concentration and one internal corporate governance mechanism – board structure, on the likelihood, frequency, horizon, precision and accuracy of management earnings forecasts in the low private litigation environment of New Zealand. Based on a sample of 1,082 management earnings forecasts issued by 125 firms listed on the New Zealand Exchange during the 1998-2007 financial reporting periods, we provide strong evidence that these four corporate governance mechanisms have a significant influence on management earnings forecast behaviour after effectively controlling for endogeneity, multicollinearity and self-selection bias problems. Specifically, firms monitored by effective corporate governance mechanisms were more inclined to pre-empt their earnings announcements with earnings forecasts (overall, non-routine and quantitative) and provide these earnings forecasts more frequently. These earnings forecasts issued by these firms were less optimistically biased. In addition, firms having more directors with accounting expertise on their boards and audit committees were more likely to provide earnings forecasts with longer horizon and smaller forecast error. Board size and the existence of a formally established audit committee are shown to have a positive impact on forecast error. A possible interpretation of our findings is that effective corporate governance mechanisms have been able to substitute for private enforcement alternative. Our findings should have important implications for the other low private litigation environments as well as for high private litigation environments such as the United States given the high economic and social costs that have been identified as being related to private litigation. en_NZ
dc.format pdf en_NZ
dc.language.iso en_NZ
dc.publisher Te Herenga Waka—Victoria University of Wellington en_NZ
dc.relation.ispartofseries Working Paper en_NZ
dc.relation.ispartofseries No. 79 en_NZ
dc.relation.uri http://www.victoria.ac.nz/sacl/cagtr/working-papers/WP79.pdf
dc.subject corporate governance en_NZ
dc.subject management earnings forecasts en_NZ
dc.subject private litigation en_NZ
dc.title The Influence of Corporate Governance on Management Earnings Forecast Behaviour in a Low Private Litigation Environment en_NZ
dc.type Text en_NZ
vuwschema.contributor.unit Centre for Accounting, Governance and Taxation Research en_NZ
vuwschema.contributor.unit School of Accounting and Commercial Law en_NZ
vuwschema.subject.anzsrcfor 150199 Accounting, Auditing and Accountability not elsewhere classified en_NZ
vuwschema.type.vuw Working or Occasional Paper en_NZ
vuwschema.subject.anzsrcforV2 350199 Accounting, auditing and accountability not elsewhere classified en_NZ

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