Accuracy of forecast information disclosed in the IPO prospectuses of Hong Kong companies

Hong Kong and international investors are interested in the accuracy of forecasts disclosed in the Initial Public Offering (IPO) prospectuses issued by Hong Kong companies. This study examined bias as well as accuracy of IPO forecasts disclosed from 1990 to 1994. The results of this study show that unlike IPO forecasts disclosed in most other countries, IPO forecasts disclosed by Hong Kong companies do not overestimate their earnings and/or dividends. Instead, the bias seems to be toward underestimation. The level of forecast accuracy is also quite high and compares favorably with that of most other countries. The results show that the level of accuracy is to some extent influenced by the number of years the company has been in business. No other company-specific variable seems to have any influence on the accuracy level. On an overall basis, the findings of this study can be interpreted to mean that IPO forecasts disclosed by Hong Kong companies provide reliable information.