Guidance, Governance, and Equity Prices
53 Pages Posted: 8 Jul 2019
Date Written: July 4, 2019
We introduce a measure of corporate governance based on the degree of transparency and managerial opportunism in firms’ guidance release policy. Firms with a good quality of guidance governance have better performance than firms with a poor quality of guidance governance and firms that do not provide guidance. We also find a causal negative relation between leverage and the quality of guidance governance during the financial crisis. Overall, firms’ guidance release policies are heterogeneous in terms of their governance-related characteristics, and providing guidance is a net positive for firms only if it is done in a consistent and transparent manner.
Keywords: Guidance, Governance, Disclosure, Financial Crisis, Leverage, Timing, Transparency
JEL Classification: G12, G14, L20, M41
Suggested Citation: Suggested Citation