Corporate Governance and the Timing of Earnings Announcements

Abstract:     
The conventional wisdom is that some managers tend to announce bad earnings news outside trading hours to minimize its price impact. Alternatively, we argue that firms may decide to announce their earnings outside trading hours to allow investors time to absorb the information and to level the playing field amongst investors. Using comprehensive time-stamp data on earnings announcements, we do not find any evidence that firms announce a higher proportion of bad news outside trading hours, nor is there evidence that reporting bad news after trading hours reduces its negative impact. We find that firms with better corporate governance tend to announce outside trading hours and that corporate governance regulations and shareholder-management alignment mechanisms are associated with an increased proportion of earnings announced outside trading hours. Surveys of corporate managers corroborate these empirical results.

Number of Pages in PDF File: 57

Keywords: Earning Announcements, Governance, Trading, Timing

JEL Classification: G11, G14

working papers series