Abstract

http://ssrn.com/abstract=2055008
 
 

Citations (2)



 


 



Management Earnings Guidance and Stock Price Crash Risk


Sophia J. W. Hamm


Ohio State University (OSU) - Fisher College of Business

Edward Xuejun Li


City University of New York (CUNY) - Stan Ross Department of Accountancy

Jeffrey Ng


Singapore Management University - School of Accountancy

April 18, 2014

Singapore Management University School of Accountancy Research Paper No. 2014-10

Abstract:     
Hutton, Marcus, and Tehranian (2009) show that more transparent financial reporting of earnings reduces the likelihood of a future stock price crash. We extend their work by examining how management earnings guidance is related to such crash risk. Accounting for endogeneity in guidance decisions, we find that higher annual guidance frequency is associated with higher crash risk, which contrasts with the notion that more guidance enhances transparency and reduces crash risk. Consistent with agency problems being an explanation, we find that the positive association is stronger for firms with higher executive stock ownership, weaker external monitoring, lower litigation risk, more upward-biased forecasts, and more opaque earnings. We also show that the association is weaker after the Sarbanes-Oxley Act, consistent with the act curbing agency problems. A key implication of our findings is that more guidance does not necessarily lead to better capital market outcomes.

Number of Pages in PDF File: 47

Keywords: crash risk, management earnings guidance, opacity

JEL Classification: G14, M41, M43

working papers series


Download This Paper

Date posted: May 9, 2012 ; Last revised: April 19, 2014

Suggested Citation

Hamm, Sophia J. W. and Li, Edward Xuejun and Ng, Jeffrey, Management Earnings Guidance and Stock Price Crash Risk (April 18, 2014). Singapore Management University School of Accountancy Research Paper No. 2014-10. Available at SSRN: http://ssrn.com/abstract=2055008 or http://dx.doi.org/10.2139/ssrn.2055008

Contact Information

Sophia J. W. Hamm (Contact Author)
Ohio State University (OSU) - Fisher College of Business ( email )
2100 Neil Avenue
Columbus, OH 43210-1144
United States
614-292-2529 (Phone)

Edward Xuejun Li
City University of New York (CUNY) - Stan Ross Department of Accountancy ( email )
One Bernard Baruch Way, Box B12-225
New York, NY 10010
United States
646-312-3235 (Phone)
Jeffrey Ng
Singapore Management University - School of Accountancy ( email )
60 Stamford Road
Room 4008
Singapore, 178900
Singapore
+6568280543 (Phone)

Feedback to SSRN


Paper statistics
Abstract Views: 2,229
Downloads: 639
Download Rank: 21,513
Citations:  2

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo8 in 0.281 seconds