Forward-Looking Disclosure in Italy: An Analysis of Company Announcements

Abstract

There is a consensus that the disclosure of information with a forward- looking perspective is essential in order to help stakeholders - and especially investors - in forming opinions on corporate performance. Perspectives and forecasts are disclosed through several documents and financial statements, such as IPO prospectuses, annual reports, interim reports and strategic plans.In recent years, Italian researchers have focused their efforts on forward- looking information provided in annual reports and strategic plans. This paper shifts the focus on company announcements, that represent a consolidated research topic in international literature but have been looked at by little research in Italy. They are a very important source of forward-looking information because of their timeliness and because companies have to disclose every kind of price sensitive information through them.The primary purpose of this study is to investigate what kinds of forecast information are disclosed in company announcements. To achieve this objective, announcements issued by a sample of Italian listed companies are analyzed with regard to categories based on the standard format required by the Italian Stock Exchange. A first analysis concerns the kind of announcement which forward- looking information are provided in (e.g. approval of an interim report). Then, forward-looking information provided in announcements are examined with reference to their estimate degree (forecast/objective), the covered topics, the disclosure of quantitative data and of underlying hypotheses.This study represents a preliminary attempt to advance our understanding of forward-looking disclosure with reference to the role of company announcements in corporate communication strategy. It also provides a basis for further research regarding the accuracy and the determinants of forward-looking information.