Does the Market Reaction to Former Information Influence the Future Voluntary Disclosure of Earnings Forecasts-Evidence from the Chinese A-Share Market

In the broad, the market reacts to the earnings forecast disclosure in three ways, namely, under reaction, overreaction and expected reaction. Generally, if the market has already overreacted (under reacted) to the disclosed earnings forecast, the company will show a weak (strong) inclination to keep disclosing information. This paper studies companies which are listed on the Shanghai and Shenzhen stock exchange and have issued their earnings forecast during 2004-2006. The result shows that, what is taken in consideration when the manager decides to disclose information is how the stock market responds to the former information. If the management found the market has overreacted to its good news, the inclination for further release should be decreased, similarly if the market has under reacted to its bad news. In a word, the decision to disclose its earnings forecast or not is on the basis of consideration of past market reaction, not only on the basis of the type of news.