Is Silence Golden? An Empirical Analysis of Firms that Stop Giving Quarterly Earnings Guidance

Posted: 21 Oct 2010  

Shuping Chen

University of Texas at Austin - Red McCombs School of Business

Dawn A. Matsumoto

University of Washington - Department of Accounting

Shivaram Rajgopal

Columbia Business School

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Date Written: October 20, 2010

Abstract

We investigate firms that stop providing earnings guidance (stoppers) either by publicly announcing their decision (announcers) or doing so quietly (quiet stoppers). Relative to firms that continue guiding, stoppers have poorer prior performance, more uncertain operating environments, and fewer informed investors. Announcers commit to nondisclosure because they (i) do not expect to report future good news; or (ii) have lower incentives to guide due to the presence of long-term investors. The three-day return around the announcement is negative. Stoppers subsequently experience increases in analyst forecast dispersion and decreases in forecast accuracy but no change in return volatility or analyst following.

Suggested Citation

Chen, Shuping and Matsumoto, Dawn A. and Rajgopal, Shivaram, Is Silence Golden? An Empirical Analysis of Firms that Stop Giving Quarterly Earnings Guidance (October 20, 2010). Journal of Accounting & Economics (JAE), Forthcoming. Available at SSRN: https://ssrn.com/abstract=1695121

Shuping Chen

University of Texas at Austin - Red McCombs School of Business ( email )

Austin, TX 78712
United States
521.471.5328 (Phone)

Dawn Matsumoto

University of Washington - Department of Accounting ( email )

224 Mackenzie Hall, Box 353200
Seattle, WA 98195-3200
United States
206-543-4454 (Phone)
206-685-9392 (Fax)

Shivaram Rajgopal (Contact Author)

Columbia Business School ( email )

3022 Broadway
New York, NY 10027
United States

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