Investor sentiment and corporate disclosure

Nittai K. Bergman, Sugata Roychowdhury

Research output: Contribution to journalArticlepeer-review

117 Scopus citations


This paper investigates how firms react strategically to investor sentiment via their disclosure policies in an attempt to influence the sentiment-induced biases in expectations. Proxying for sentiment using the Michigan Consumer Confidence Index, we show that during low-sentiment periods, managers increase forecasts to "walk up" current estimates of future earnings over long horizons. In contrast, during periods of high sentiment, managers reduce their long-horizon forecasting activity. Further, while there is an association between sentiment and the biases in analysts' estimates of future earnings, management disclosures vary with sentiment even after controlling for analyst pessimism, indicating that managers attempt to communicate with investors at large, and not just analysts. Our study provides evidence that firms' long-horizon disclosure choices reflect managers' desire to maintain optimistic earnings valuations.

Original languageEnglish (US)
Pages (from-to)1057-1083
Number of pages27
JournalJournal of Accounting Research
Issue number5
StatePublished - Dec 2008
Externally publishedYes

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics

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