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Do Managers Withhold Bad News?S.P. KothariMassachusetts Institute of Technology (MIT) - Sloan School of Management Susan ShuBoston College - Carroll School of Management Peter D. WysockiUniversity of Miami - School of Business Administration Journal of Accounting Research, Forthcoming MIT Sloan Research Paper No. 4556-05 Abstract: In this study, we examine whether managers delay disclosure of bad news relative to good news. If managers accumulate and withhold bad news up to a certain threshold, but leak and immediately reveal good news to investors, then we expect the magnitude of the negative stock price reaction to bad news disclosures to be greater than the magnitude of the positive stock price reaction to good news disclosures. We present evidence consistent with this prediction. Our analysis suggests that management, on average, delays the release of bad news to investors.
Number of Pages in PDF File: 54 Keywords: Bad News, Conservatism, Disclosure JEL Classification: G14, G30, K22, M41, M45, D82, M40 Accepted Paper SeriesDate posted: September 21, 2005 ; Last revised: April 27, 2012Suggested CitationContact Information
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