The Impact of Litigation Risk on the Strategic Timing of Management Earnings Forecasts
29 Pages Posted: 10 Jun 2015
Date Written: June 2015
This paper examines whether managers strategically time their earnings forecasts (MEFs) as litigation risk increases. We find as litigation risk increases, the propensity to release a delayed forecast until after the market is closed (AMC) or a Friday decreases but not proportionally more for bad news than for good news. How costly this behaviour is to investors is questionable as share price returns do not reveal any under‐reaction to strategically timed bad news MEF released AMC. We also find evidence consistent with managers timing their MEFs during a natural no‐trading period to better disseminate information.
Keywords: Strategic disclosure, Management earnings forecasts, Disclosure timing, Litigation risk, Continuous disclosure, Regulation
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