Spreading the Word: Price Discovery and Newswire Dissemination of Management Earnings Guidance

60 Pages Posted: 29 Nov 2012 Last revised: 12 Jan 2021

See all articles by Brady J. Twedt

Brady J. Twedt

University of Oregon - Lundquist College of Business

Date Written: March 1, 2015

Abstract

This study investigates the impact of dissemination on the efficiency of the price discovery process with respect to management earnings guidance disclosures. I first identify firm and guidance characteristics associated with the likelihood that guidance receives coverage in the Dow Jones Newswires. Using propensity-score, within-firm, and returns-based matched control samples of guidance, I find that newswire dissemination is associated with larger initial price reactions and, more importantly, an increase in the speed with which guidance information is incorporated into price. I also find that newswire coverage affects the market’s reaction to stand-alone versus bundled guidance and good versus bad news guidance. This study is the first to provide evidence of systematic variation, both across and within firms, in the breadth of guidance dissemination, and it shows that this variation has a substantial effect on how investors respond to guidance.

Keywords: Management earnings guidance, Price discovery, Information dissemination

JEL Classification: G14, M41, L82

Suggested Citation

Twedt, Brady J., Spreading the Word: Price Discovery and Newswire Dissemination of Management Earnings Guidance (March 1, 2015). Accounting Review, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2182162 or http://dx.doi.org/10.2139/ssrn.2182162

Brady J. Twedt (Contact Author)

University of Oregon - Lundquist College of Business ( email )

Lundquist College of Business
1208 University of Oregon
Eugene, OR 97403
United States

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