Can Institutional Investors Improve Voluntary Management Earnings Forecasts?

We use data from 2010 to 2016 on listed companies in China to study the relationship between heterogeneous institutional investors and voluntary management earnings forecasts. We find that active institutional investors have a significantly negative influence on voluntary management earnings forecast only when the proportion of active institutional investors is in the upper 50 quartiles. Further studies show that, first, the inhibitory effect of active institutional investors on voluntary earnings forecasts mainly affects speculative active institutional investors and unstable active institutional investors. Second, boards that function better can significantly reduce the inhibitory effect of active institutional investors on the company's voluntary disclosures, and this inhibition occurs only with boards that do not have good governance. We also find that the overall shareholding of institutional investors significantly inhibits the company's voluntary management earnings forecasts, indicating that institutional investors should improve their supervision and governance role in voluntary management earnings forecasts at listed companies in China.