AIR POLLUTION AND THE QUALITY OF MANAGEMENT EARNINGS FORECAST

The irrational factors caused by air pollution can have effects on the quality of the information disclosed by management. We set the management earnings forecasts of A-share companies during the period from 2013 to 2018 as the sample to detect the effect of the air quality on the quality of management earnings forecasts. The results indicate that the optimistic bias of management earnings forecast is negatively related to the extent of air pollution and the accuracy of management earnings forecast is positively related to it. The mechanism test implies that air pollution will trigger the pessimism of management and strengthen their expectations for the tightening of future environmental policy, which will reduce the optimistic bias of earnings forecasts and improve its accuracy. We contribute to the literature on air quality and disclosure from the perspective of managers and provide direct evidence for the political effects of air pollution.