Disclosure

Abstract

Who should be told the result of a profit forecast? A first-thought reply might be: any interested party. Does this include competitors, people interested in taking over the company, and the unions? Does it matter if the forecast is good news or bad? Would it be de-motivating (or motivating) to tell the more junior staff? The forecast is important information; the managers are legally the servants of the shareholders, and the shareholders are the public! This problem has not been missed by the accounting literature. Apart from issues of how such information should be communicated, human behavior theory has been used to deduce whether managers would want to disclose this result. There has been little empirical evidence collected of managers’ professed preference.