Ownership structure and disclosure quality: Evidence from management forecasts revisions in Japan

We investigate the relationship between ownership structure and quality of disclosure in the case of Japanese firms. Our measure of disclosure quality is denoted by the attitude of firms toward voluntary revisions of management earnings forecasts, which are effectively mandatory in Japan. The results show that firms with high foreign and domestic institutional ownership are more likely to provide management forecasts revisions in a voluntary and timely manner. In contrast, firms with high bank ownership have a greater propensity to withhold material changes in management forecast estimates until the very last moment when they are legally compelled to reveal that information. These findings suggest that active investors are able to induce firms to adopt better disclosure practices,, while investors with close business ties and access to firms' private information appear to restrict the flow of information to other investors.