This paper provides an evidence how disaggregated management earnings (DISITEM) impactsthe forecast credibility and financial reporting quality after adopting Regulation Fair Disclosure. On the basis of prior studies that manager has an incentive in choosing management forecasts’form that optimizes the value of their voluntary disclosure (Healy et al. 1999; Aboody andKasznik 2000; Beyer et al. 2010). According to prior literatures (Aboody and Kasznik 2000;Na and Lee 1999; Kwon et al. 2011), the manager opportunistically distort the managementforecasts because of forecasting incentives, such as reducing cost of equity capital or increasingmanager’s compensation. These incentives by managers are likely to increase the outsiders’skepticism about management forecasts. That is, it is likely to raise questions about accuracyof management forecasts to outsiders, even though managers disclose the credible managementforecasts. Thus, managers have the incentive in provide supplemental disclosures serve to signal thatthe management forecasts are more credible for outsiders. In other word, managers often providemanagement forecasts in the form of disaggregated information to maximize prior beliefs ofoutsiders. Hutton et al. (2003) argue that managers provide the supplement information (i.e.,namely, “soft talk” disclosures or verifiable forward-looking statements) when managers disclosegood news rather than bad news forecasts, in order to bolster the credibility of good newsforecasts. More recently, Hirst et al. (2007) provide experimental evidence how disaggregatedforecasts influence perceived forecast credibility or perceived financial reporting quality basedon following arguments. First, the disaggregated management earnings are the positive signalabout credibility of management forecasts, because managers disclose disaggregating information when managers have confidence their predictability of future performance. Second, disaggregatedearnings forecasts provide additional clarity that is the opportunity to evaluate the credibilityof management forecasts. Merkley et al. (2011) also suggest that disaggregated managementforecasts can enhance the credibility of management forecasts, because disaggregated managementforecasts can be used to commit future earnings ex ante. That is, disaggregated managementforecasts commit managers how to achieve earnings goal in particular ways. Last, when firmsissue disaggregating forecasts, outsiders easily evaluate the financial reporting quality andrestrict earnings management’s opportunity in order to achieve management forecasts. In thisreason, we believe that disaggregated management forecasts play an important role in detectingearnings management and thereby effectively utilize to increase financial reporting quality. Therefore, we investigate whether disaggregated management forecasts inevitably commit tohigher financial reporting quality. Taken together, we are interested in whether disaggregated management forecasts that is oneof the forecast form can affect the credibility of forecasts and mitigate the behavior of earningsmanagement. For an empirical analysis, we focus on firms with management forecasts that arelisted in Korean Exchange Market (KSE) for the sample period from 2002 to 2010. This paperemploys the accuracy of management forecasts and performance-controlled discretionary accrualsas the dependent variables, in order to examine the effect of disaggregated management forecastson forecast credibility and financial reporting quality. We also control the effect of selectionbias and causality by using the method Heckman(1979) and Simultaneous Equation. Our results show that the accuracy of management forecasts for firms with disaggregatinginformation is higher than those for firms with aggregating information. Also, we find thatdisaggregated management forecasts play an important role in increasing financial reportingquality. The results of this paper indicate that managers might credibly communicate their marketexpectations when they disclose disaggregated management forecasts because of additional claritythat is the opportunity to easily evaluate the details of management forecasts. In addition, ourresult suggests that mangers might restrict the incentive of earnings management, becauseoutsiders have an opportunity to evaluate the details of earnings component ex ante (Hutton etal. 2003; Hirst et al. 2007). These results are robust by testing alternative explanations thatexclude re-disclosure firms, use absolute value of discretionary accruals and use the number ofdisaggregated management forecasts. We also include several analyses in this paper to controlClustering errors, fixed effects, and serial correlation. These results are consistent with ourinterpretation. This study highlights the essential role of disaggregated accounting information on accuracyof management forecasts and quality of actual earnings reports. These findings provide importantimplications to regulators, investors and creditors that are interested in credibility of managementforecasts by showing that supplement information treats as informative to evaluate its credibilityex ante. This implies that investors can use disaggregated management forecasts as a communicationdevice, rather than expectations management. We empirically document the effect of disaggregatedmanagement earnings forecasts on the credibility of management forecasts or quality of financialreporting by extending related literatures (Hutton et al. 2003; Hirst et al. 2007; Petriuc 2010;Elliott et al. 2011; etc.) who theoretically or experimentally provide the benefit of disaggregatedmanagement forecasts. Thus, academics can also apply the empirical results in this paper forsupporting related researches.