Terrorism Activities and Management Forecasts

47 Pages Posted: 27 Jan 2020

See all articles by Augustine Duru

Augustine Duru

American University - Kogod School of Business

Yangyang Fan

Hong Kong Polytechnic University - School of Accounting and Finance

Christo A. Pirinsky

University of Central Florida

Mikhail Pevzner

University of Baltimore - Merrick School of Business

Date Written: January 3, 2020

Abstract

We study the effect of terrorist attacks on the disclosure policies of local firms. We find that the managers of firms located closer to the epicenters of the attacks are more likely to issue optimistic earnings forecasts relative to the managers of a control group of unaffected firms. The exposure-effect on managerial optimism intensifies for firms with stronger geographic focus, more uncertain fundamentals, larger R&D expenditures, and greater need for external equity financing. More capable managers tend to be more optimistic following a terrorist event. Our results are consistent with the idea that earnings forecasts are used by managers to counterbalance negative investor sentiment in capital markets.

Suggested Citation

Duru, Augustine and Fan, Yangyang and Pirinsky, Christo Angelov and Pevzner, Mikhail, Terrorism Activities and Management Forecasts (January 3, 2020). Available at SSRN: https://ssrn.com/abstract=3513352 or http://dx.doi.org/10.2139/ssrn.3513352

Augustine Duru

American University - Kogod School of Business ( email )

4400 Massachusetts Avenue NW
Washington, DC 20816-8044
United States
202-885-1937 (Phone)
202-885-1992 (Fax)

Yangyang Fan

Hong Kong Polytechnic University - School of Accounting and Finance ( email )

Hung Hom
Kowloon
Hong Kong

Christo Angelov Pirinsky

University of Central Florida ( email )

College of Business Administration/Finance
PO Box 161400
Orlando, FL FL 32816
United States
407-823-5962 (Phone)

Mikhail Pevzner (Contact Author)

University of Baltimore - Merrick School of Business ( email )

1420 N. Charles St.
Baltimore, MD 21201-5779
United States

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