Majority Shareholders’ Stock Sales, Dual Agency Conflicts, and Management Earnings Forecasts

This paper examines whether and how stock sales by majority shareholders in China affect the management earnings forecasts (MEFs) of listed firms. It shows that managers choose the type of disclosure, the timing, and the forecast characteristics to help majority shareholders sell their stocks for higher profits. The findings imply that the selected characteristics of MEFs matched with the majority stockholders’ stock sales decrease the quality of information disclosure and reduce the efficiency of capital allocation in Chinese capital market.