Management forecast and investment decisions

Abstract

Investors decision is made based on several factors within the company, and mostly it depends on the external reported financial forecast of the company. Even though the forecast is an essential element for a successful investment, most stakeholders cannot directly take this factor into consideration for investment. Rely on the data from the CSMAR, and the model’s regression analysis, I found forecast quality is negatively related with the future stock price. In this study I followed with the former researcher to choose three-year A share market companies which is from 2008 to 2010. Based on those data I get the relation analysis information, which proved that the Chinese companies’ externally observed forecast cannot be used to infer the internal capital budgeting of the company.