This paper investigates Fair Disclosure Regulation's (FDR) effect on the conservativeness of management earnings forecasts. FDR restricts selective disclosure of material information, which could increase the reliance of investors or analysts on management earnings forecasts. Management could disclose more conservative management initial earnings forecasts to maintain their reputation after the FDR because it could increase the cost of revising their initial earnings forecasts downward. I find management discloses more conservative their earnings forecasts after the FDR.
This study examines the stance held by companies on the disclosure of segment information (sales, profit, order and order backlog) following the introduction of the Japanese Management Approach. The subject of this study ranges over 100 companies in machinery-related industries. Following the enactment of the Japanese Management Approach, retraction in disclosure status on the area segment (sales and profit) was observed in 45 companies in 100 companies in machinery-related industries. In contrast, progress in disclosure status on the area segment (order and order backlog) was observed in over 10 companies. The reason for the retraction is “the fallacy of disclosure in the matrix type company”. Diversified company chooses the business segment's disclosure, and abolishes the area segment's disclosure. Japanese Management approach depends on the president's decision. Therefore, Japanese management approach has 5 problems of disclosure.