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Earnings Preannouncement Strategies

Author

Listed:
  • Leonard C. Soffer

    (Northwestern University)

  • S. Ramu Thiagarajan

    (Mellon Capital Management Corporation)

  • Beverly R. Walther

    (Northwestern University)

Abstract

We examine the disclosure strategies managers follow when theyd “preannounce” quarterly earnings shortly before formal earnings announcements. We document that managers with bad news release essentially all of their news at the preannouncement date, while managers with good news only release about half of their news. Controlling for the combined news released at the preannouncement 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.

Suggested Citation

  • Leonard C. Soffer & S. Ramu Thiagarajan & Beverly R. Walther, 2000. "Earnings Preannouncement Strategies," Review of Accounting Studies, Springer, vol. 5(1), pages 5-26, March.
    • Handle: RePEc:spr:reaccs:v:5:y:2000:i:1:d:10.1023_a:1009643517840
    DOI: 10.1023/A:1009643517840
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    References listed on IDEAS

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    Cited by:

    1. Kale, Arati & Kale, Devendra, 2023. "Do exogenous economic crises change investors’ response to earnings announcements?: A detailed review using the data from COVID-19 pandemic," The Journal of Economic Asymmetries, Elsevier, vol. 28(C).
    2. Michaelides, Alexander & Nishiotis, George & Milidonis, Andreas & Papakyriacou, Panayiotis, 2012. "Sovereign Debt Rating Changes and the Stock Market," CEPR Discussion Papers 8743, C.E.P.R. Discussion Papers.
    3. Gomes, Armando & Gorton, Gary & Madureira, Leonardo, 2007. "SEC Regulation Fair Disclosure, information, and the cost of capital," Journal of Corporate Finance, Elsevier, vol. 13(2-3), pages 300-334, June.
    4. William Ciconte & Marcus Kirk & Jennifer Wu Tucker, 2014. "Does the midpoint of range earnings forecasts represent managers’ expectations?," Review of Accounting Studies, Springer, vol. 19(2), pages 628-660, June.
    5. Beverly R. Walther & Richard H. Willis, 2013. "Do investor expectations affect sell-side analysts’ forecast bias and forecast accuracy?," Review of Accounting Studies, Springer, vol. 18(1), pages 207-227, March.
    6. Sophia Zhengzi Li & Zeyao Luan, 2025. "News-based investor disagreement and stock returns," Review of Accounting Studies, Springer, vol. 30(3), pages 2312-2375, September.
    7. Julia D’Souza & K. Ramesh & Min Shen, 2010. "Disclosure of GAAP line items in earnings announcements," Review of Accounting Studies, Springer, vol. 15(1), pages 179-219, March.
    8. Senyo Tse & Jennifer Wu Tucker, 2010. "Within-industry timing of earnings warnings: do managers herd?," Review of Accounting Studies, Springer, vol. 15(4), pages 879-914, December.

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