Corporate governance and management earnings forecast behaviour:Evidence from a low private litigation environment

Purpose The purpose of our study is to examine the influence of three external corporate governance mechanisms (continuous disclosure regulatory reform, analyst following and ownership concentration) and one internal corporate governance mechanism (board structure) on the likelihood, frequency, horizon, precision and accuracy of management earnings forecasts in the low private litigation environment of New Zealand. Design/methodology/approach The authors use a sample of 1,082 management earnings forecasts issued by 125 firms listed on the New Zealand Exchange during the 1998-2007 financial reporting periods. The authors effectively control the self-selection bias problem inherent in management earnings forecasts. Findings The findings provide strong evidence that corporate governance significantly influences management earnings forecast behaviour. Firms with effective corporate governance tend to forecast earnings and provide these earnings forecasts more frequently and precisely. Earnings forecasts issued by firms with more non-executive directors on the board are less optimistically biased. A possible interpretation of the findings is that effective corporate governance mechanisms are able to substitute for a private enforcement alternative. Originality/value The findings have value in informing governance choices in the absence of external disciplinary mechanisms such as private litigation

Sample characteristics.

*<p>FFPE =  Formalin-fixed, paraffin-embedded, FF =  Fresh- frozen.</p

Low levels of nuclear ß-catenin coincide with high levels of E-cadherin in BCC.

<p><b>A.</b> Microphotographs of selected sample of ß-catenin, showing nuclear staining only at the periphery or the tumor. Bar = 200 µm. <b>B.</b> Microphotographs of selected sample of E-cadherin showing lowered expression of the tumor compared with the normal epidermis.</p

Expression of SHH, APC, SFRP5 and RASSF1A is reduced in BCC versus healthy skin control tissue.

<p><b>A.</b> Relative expression levels of <i>APC</i> and <i>SFRP5 i</i>n BCC tissues as compared to the expression level in normal skin (n = 6) (2−^ΔΔCt). All reactions were done in triplicates, standard error of the mean (SEM) is shown as error bars. Expression levels were normalized to Cyclophilin A. U, unmethylated sample; M, methylated sample. *p≤0.05, **p≤0.001. <b>B.</b> Relative mRNA expression in unmethylated versus methylated BCC samples for either <i>APC</i> or <i>SFRP5. </i><b>C.</b> Microphotographs of selected samples of SHH, APC and RASSF1A. Bar = 200 µm.</p