Earnings preannouncement strategies

Leonard C. Soffer*, S. Ramuthiagarajan, Beverly Walther

*Corresponding author for this work

Research output: Contribution to journalArticle

139 Scopus citations

Abstract

We examine the disclosure strategies managers follow when they "preannounce" quarterly earnings shortly before formal earnings announcements. We document that managers with bad news release essentially all of their news at the pre announcement date, while managers with good news only release about half of their news. Controlling for the combined news released at the pre announcement and earnings announcement dates, firms with negative earnings announcement surprises have significantly lower excess returns for the period from just before the preannouncement to just after the earnings announcement. This finding is consistent with the observed disclosure strategies whereby managers attempt to avoid negative earnings announcement surprises;, and suggests that how information is presented can affect the market's reaction to that information.

Original languageEnglish (US)
Pages (from-to)5-26
Number of pages22
JournalReview of Accounting Studies
Volume5
Issue number1
DOIs
StatePublished - Jan 1 2000

Keywords

  • Disclosure
  • Earnings Announcements
  • Market Reaction
  • Preannouncements

ASJC Scopus subject areas

  • Accounting
  • Business, Management and Accounting(all)

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