It’s Showtime: Do Managers Report Better News Before Annual Shareholder Meetings?

Journal of Accounting Research, Forthcoming

45 Pages Posted: 14 May 2011  

Valentin Dimitrov

Rutgers, The State University of New Jersey - Accounting & Information Systems

Prem C. Jain

Georgetown University - Department of Accounting and Business Law

Date Written: May 10, 2011

Abstract

Annual shareholder meetings provide an opportunity for shareholders to express their concerns with corporate performance, pressuring managers to demonstrate good performance. We show that managers respond to the shareholder pressure by reporting positive corporate news before the annual shareholder meetings. Specifically, we find significantly positive average cumulative abnormal returns during the 40 days before the annual meeting date. The pre-meeting returns are significantly higher when shareholder discontent with managerial performance is likely to be stronger. The decile of companies with the worst past stock price performance exhibits average cumulative abnormal returns of 3.4% and buy-and-hold returns of 7.0% during the 40-day pre-meeting period. Companies with poor past performance exhibit even higher pre-meeting returns when shareholder pressure on management is greater, such as when institutional ownership is high, when CEO compensation is high, and when shareholders submit proxy proposals on corporate governance. We complement the evidence based on CARs by showing how managers of poorly performing firms manage the timing and content of earnings announcements and management forecast announcements before the annual shareholder meetings. Overall, the results suggest that managers attempt to influence shareholders before annual shareholder meetings through positive news.

Keywords: corporate governance, annual meetings, disclosure, stock returns, earnings announcements, management forecasts

JEL Classification: G14, G34, M41

Suggested Citation

Dimitrov, Valentin and Jain, Prem C., It’s Showtime: Do Managers Report Better News Before Annual Shareholder Meetings? (May 10, 2011). Journal of Accounting Research, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1839529

Valentin Dimitrov

Rutgers, The State University of New Jersey - Accounting & Information Systems ( email )

1 Washington Park
Newark, NJ 07102
United States

Prem C. Jain (Contact Author)

Georgetown University - Department of Accounting and Business Law ( email )

McDonough School of Business
Washington, DC 20057
United States
202-687-2260 (Phone)

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