• Selected
• Entire List

Abstract:
This paper investigates whether a spin-off, equity carve-out, or targeted stock offering results in making the operating performance of a firm's business segments more transparent. Using a sample of 146 spin-offs, equity carve-outs, and targeted stock offerings between 1990-1995, we document significant decreases in analyst earnings forecast errors as well as divergence among individual analyst earnings forecasts following these transactions. Moreover, we find that the levels of analyst and brokerage house coverage increase significantly following these transactions. Tracking the identity of individual analysts, we find that there is substantial analyst turnover around the sample deals, and the decrease in analyst earnings forecast errors following the sample deals is greatest when firms are able to attract new analysts. Taken together, these findings suggest that firms experience improvements in the quality of analyst coverage around spin-offs, equity carve-outs, and targeted stock offerings, and these improvements are at least partially driven by changes in the composition of analyst coverage.


See also the related papers "Valuation of Bankrupt Firms" by Stuart Gilson, Edith Hotchkiss, and Richard Ruback; and "Junk Bonds, Bank Debt, and Financing Corporate Growth" by Stuart Gilson and Jerold Warner

Abstract:
This paper investigates whether the quality of a firm's disclosure practices affects the composition of a firm's institutional investor base and whether this association has implications for a firm's stock return volatility. The findings indicate that firms with higher disclosure quality, as measured by AIMR rankings, have greater institutional ownership, but the particular types of institutional investors that are attracted to disclosure quality tend to have no net impact on firms' stock return volatility. In contrast, improvements in disclosure quality are shown to produce contemporaneous increases in ownership primarily by transient-type institutions. Such institutions can be characterized as having a short-term investment focus along with a propensity to trade aggressively. The findings indicate that firms with disclosure quality improvements resulting in higher transient institutional investor ownership experience subsequent increases in stock return volatility.

Abstract:
This paper investigates whether the quality of a firm's disclosure practices affects the composition of a firm's institutional investor base and whether this association has implications for a firm's stock return volatility. The findings indicate that firms with higher disclosure quality, as measured by AIMR rankings, have greater institutional ownership, but the particular types of institutional investors that are attracted to disclosure quality tend to have no net impact on firms' stock return volatility. In contrast, improvements in disclosure quality are shown to produce contemporaneous increases in ownership primarily by transient-type institutions. Such institutions can be characterized as having a short-term investment focus along with a propensity to trade aggressively. The findings indicate that firms with disclosure quality improvements resulting in higher transient institutional investor ownership experience subsequent increases in stock return volatility.

Abstract:
This paper examines the influence of managers' earnings guidance on analysts and investors. Specifically, we analyze whether certain firm characteristics affect how successful management earnings forecasts are at influencing analysts' earnings estimates. We also analyze whether managers' varying degrees of influence with analysts has implications for the relative accuracy of these two groups in predicting earnings. Lastly, we attempt to provide some evidence on how investors utilize managers' earnings guidance as well as analysts' earnings estimates in setting stock prices.

We find that managers have a particularly difficult time influencing analysts in circumstances where uncertainty about future earnings is relatively high. This finding suggests that analysts place less weight on managers' earnings guidance in those circumstances where it would presumably be most useful. We also find that analysts deviate most from managers' earnings guidance when doing so results in them having relatively more accurate earnings estimates, ex-post. Our stock price evidence suggests that investors, when faced with a divergence in beliefs between managers and analysts over future earnings, appear to place greater weight on managers' statements. This occurs even though there are circumstances in which analysts have a comparative forecasting advantage.

Abstract:
This paper examines whether analyst earnings forecast revisions around management earnings forecasts are conditioned on managers' previous accrual decisions. We find that analysts rely less heavily on management earnings forecast information when it conflicts with prior signals about earnings performance contained in accruals. Moreover, we find that analyst earnings forecast errors decline by a smaller amount around management earnings forecasts when management earnings forecast information and prior accrual signals are inconsistent. These findings suggest that the influence of management earnings forecasts on analysts' earnings expectations is contingent upon managers being able to convince analysts as to the informativeness of these disclosures in light of prior signals about earnings performance contained in accruals.

Abstract:
This paper investigates whether a firm's disclosure practices affect the composition of its institutional investor ownership and, hence, its stock return volatility. The findings indicate that firms with higher AIMR disclosure rankings have greater institutional ownership, but the particular types of institutional investors attracted to greater disclosure have no net impact on return volatility. However, yearly improvements in disclosure rankings are associated with increases in ownership primarily by "transient" institutions, which are characterized by aggressive trading based on short-term strategies. Firms with disclosure ranking improvements resulting in higher transient ownership are found to experience subsequent increases in stock return volatility.

Corporate disclosure; Institutional investors; Stock Return Volatility

Abstract:
This paper investigates the association between voluntary disclosures and insider transactions (i.e., transactions made by managers in their own firms' shares). Specifically, insider transaction patterns are analyzed around 949 management earnings forecasts issued by 85 firms between July 1, 1979 and December 31, 1987. The findings show that the incidence of insider transactions decreases prior to management earnings forecasts and increases afterwards. Moreover, the findings show that the likelihood of an insider transaction occurring in the period following a management earnings forecast is related to empirical proxies for the possibility of a manager being privately informed. Overall, these findings are consistent with managers utilizing voluntary disclosures to bond themselves against exploiting private information for insider transaction purposes.