VOLUNTARY DISCLOSURES AND DISPERSION IN EARNINGS FORECASTS CONDUCTED BY ANALYSTS

Cynthia L. Taylor
University of Arkansas at Little Rock
Meihua Koo
California State Polytechnic University, Pomona
ABSTRACT
For the past twenty years, accounting regulatory bodies have recommended companies
disclose proprietary information that explains their investment potential to investors. Underlying
this request for more transparency is the presumption that increased disclosure reduces
uncertainty. Using dispersion in analysts’ earnings forecast as a proxy for uncertainty, this study
examines whether increased voluntary disclosure reduces analysts’ forecast dispersion, and
whether voluntary disclosure is affected by the firm’s mandatory disclosure environment. The
results suggest that voluntary disclosure is a function of the mandatory disclosure environment and
firm’s size and voluntary disclosure are negatively related to forecast dispersion or uncertainty.