2016-11-02T18:49:00

Chinese regulators mandate management earnings forecasts when managers' earnings expectations meet bright-line thresholds and allow voluntary forecasts in other circumstances. We examine the effects of this mixed approach. We find that Chinese mandatory forecasts have significant information content. Moreover, we observe a learning effect: mandatory forecasts appear to stimulate voluntary forecasts in subsequent periods as managers become familiar with the forecasting and disclosing procedures through forced experience. We find one negative consequence of the mixed approach, however: managers appear to manipulate earnings to avoid the forecast threshold of large earnings decreases. Overall, we document the pros and cons of a mixed approach toward management earnings forecasts in a major emerging market.

This paper investigates how PM2.5 affects the stock price of firms from heavy polluting industries and environment-friendly industries in China, applying the emotion cognition theory into the investor sentiment theory framework. We argue that PM2.5 will affect people's emotion, which in turn, affect their investing decision. Meanwhile, people will attribute the release of PM2.5 to heavy polluting firms, when have better predictions for environment-friendly firms. The empirical results are consistent with the argument: PM2.5 has negative impact on stock price of heavy polluted firms, and has positive impact on environment-friendly industries firms. The results of this paper imply that capital market can play as an "invisible hand" to improve air quality of China.

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