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 language | English (US) |
|---|---|
| Pages (from-to) | 5-26 |
| Number of pages | 22 |
| Journal | Review of Accounting Studies |
| Volume | 5 |
| Issue number | 1 |
| DOIs | |
| State | Published - 2000 |
Funding
We thank First Call Corporation, and Stan Levine in particular, for the preannouncement data used in this paper. We are grateful to Ray Ball, Sandip Bhagat, George Bischof, Robert Bowen, David Burgstahler, Dan Collins, Mike Coyne, Don Cram, Margaret Eichman, Tom Fields, Scott Keating, Mark Lang, Brian Langenberg, Charles Lee, David Lesmond, Carolyn Levine, Robert Libby, Joseph Linmacher, Linda McDaniel, Robert Magee, Laureen Maines, Dawn Matsumoto, Mark Peecher, Mort Pincus, Srini Rangan, Lawrence Revsine, Katherine Schipper, Terry Shevlin, D. Shores, Ross Watts, Greg Waymire, Richard Willis, Jerry Zimmerman, an anonymous referee, and workshop participants at University of California at Berkeley, University of California at Santa Barbara, University of Chicago, Duke University, University of Iowa, Université Laval, Massachusetts Institute of Technology, University of North Carolina, Northwestern University, the Twelfth Annual Prudential Quantitative Conference, University of Rochester, Tulane University, and University of Washington for useful discussions and comments. We appreciate the financial support of the Accounting Research Center at Kellogg Graduate School of Management, Northwestern University. Analyst forecast data are from Zacks Investment Research.
Keywords
- Disclosure
- Earnings Announcements
- Market Reaction
- Preannouncements
ASJC Scopus subject areas
- Accounting
- General Business, Management and Accounting