An Empirical Investigation of Pre-Earnings Announcement Quiet Periods

31 Pages Posted: 19 Apr 2002

See all articles by Richard M. Frankel

Richard M. Frankel

Washington University in Saint Louis - Olin Business School

Peter R. Joos

INSEAD

Joseph Weber

Massachusetts Institute of Technology (MIT) - Sloan School of Management

Date Written: February 2002

Abstract

Previous research suggests legal liability as a strong determinant of corporate disclosure policies and the content of corporate disclosures. We study the influence of pre-earnings announcement quiet periods on legal liability and the affect of Regulation FD on corporation's use of quiet periods. The we provide evidence on three questions: First, we test whether quiet periods have become more prominent following the implementation of regulation FD. Second, we compare the characteristics of quiet period firms to firms making earnings forecasts after the fiscal-period-end. Third, we investigate how trading volume at and before earnings announcement dates differs between companies with quiet periods and companies making earnings forecasts after the fiscal-period-end. The purpose of these tests is to better understand the effect of legal liability on non-disclosure policies. We find a substantial increase in the number of reported quiet periods after implementation of FD requirements. We also find that quiet period firms have characteristics associated with higher litigation risk. Finally, we find that volume is significantly higher before and significantly lower at earnings announcement dates associated with quiet periods.

JEL Classification: K22, M41, M45

Suggested Citation

Frankel, Richard M. and Joos, Peter R. and Weber, Joseph Peter, An Empirical Investigation of Pre-Earnings Announcement Quiet Periods (February 2002). Available at SSRN: https://ssrn.com/abstract=304486 or http://dx.doi.org/10.2139/ssrn.304486

Richard M. Frankel (Contact Author)

Washington University in Saint Louis - Olin Business School ( email )

One Brookings Drive
Campus Box 1133
St. Louis, MO 63130-4899
United States

Peter R. Joos

INSEAD ( email )

1 Ayer Rajah Avenue
Singapore, 138676
Singapore

Joseph Peter Weber

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

100 Main Street
E62-416
Cambridge, MA 02142
United States
617-253-4310 (Phone)

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