Further Evidence on Nontrading Period Information Release
Posted: 23 Aug 1998
Using a sample of 856 management earnings forecasts, we provide evidence that managers release larger shock earnings forecasts in nontrading periods. Our results do not depend on whether the magnitude of the shock is measured exogenously (unexpected accounting earnings) or endogenously (security market reaction). The timing effects are more pronounced for less precise (i.e., open-interval and closed-interval) forecasts. Also, we provide evidence of an overnight reaction to closed-period management forecast releases.Our results are consistent with explanations for voluntary disclosure that rely on a precommitted policy of information asymmetry reduction (see Diamond 1985; King, Pownall and Waymire 1990). These explanations lead to predictions of strategic timing of greater shocks in the nontrading period in order to provide the less-informed with a period for information evaluation.
JEL Classification: G14
Suggested Citation: Suggested Citation