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Capital Market Consequences Of Expectations Management In The Postregulation Fair Disclosure Period

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  • Sherry Fang Li

Abstract

This paper investigates the capital market consequences of expectations management in the postRegulation Fair Disclosure period. Results show that investors punish firms that deliberately issue pessimistic public guidance to dampen analysts’ expectations to a beatable level in the post-Regulation Fair Disclosure Era. I find that on average, the negative stock price effects caused by management’s pessimistic guidance dominate the positive stock price effects associated with the positive earnings surprises. Furthermore, both the short-term stock return over the combined guidance plus earnings announcement window and the long-term total period return are more negative for guidance firms than for firms that do not guide and thus miss financial analysts’ expectations

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  • Sherry Fang Li, 2019. "Capital Market Consequences Of Expectations Management In The Postregulation Fair Disclosure Period," Accounting & Taxation, The Institute for Business and Finance Research, vol. 11(1), pages 11-20.
    • Handle: RePEc:ibf:acttax:v:11:y:2019:i:1:p:11-20
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    References listed on IDEAS

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    More about this item

    Keywords

    Expectations Management; Earnings Guidance; Managerial Guidance; Regulation Fair Disclosure; Analysts’ Expectations; Capital Market;
    All these keywords.

    JEL classification:

    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • M48 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Government Policy and Regulation

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