Abstract: We examine whether and how the accuracy of prior management earnings forecasts (hereinafter APMEF) affects corporate debt default risk using A-share companies listed on Shanghai and Shenzhen Stock Exchanges during the period from 2006 to 2023. The results indicate that APMEF can significantly reduce corporate default risk. A one standard deviation increase in APMEF leads to a drop of 18.17% over the sample mean of corporate debt default risk. APMEF affects corporate debt default risk via forecast reputation and forecasting ability. The negative relation between APMEF and corporate debt default risk mainly occurs in companies facing high external uncertainty, exposed to stringent monetary policies and low-percentage owned by common institutions and in the growing or declining stage of their corporate life cycle. Our results enrich researches on the relationship between information disclosure and debt default risk, and provide evidence on the “spill-over effects” of mandatory management earnings forecast. The results also shed lights on the feasible approach to prevent and resolve material financial risk via information disclosure.

Key words: management earnings forecast, debt default risk, forecast reputation, forecasting ability