Voluntary vs

Companies making initial public offerings in Greece were obliged to include next year‟s profit in the new issue prospectuses until the regulations changed to voluntary status. This study takes advantage of these two regulatory regimes and compares the accuracy of earnings forecasts under both mandatory and voluntary disclosure environments. Findings indicate behavioural change, as pessimistic earnings forecasts during the mandatory era turn optimistic in the voluntary period. The comparison of these two regimes suggests that mandatory earnings forecasts can force firms to forecast that have neither the incentives nor the ability to do so. Instead, the results imply that regulations penalizing IPOs for providing highly inaccurate forecasts appear to be a more appropriate regulatory strategy. Accuracy of earnings improves after the introduction of voluntary disclosures where firms that provide forecasts are characterized as mature, with high demand multiple and low retained ownership.