Do Managers Withhold Bad News?
Massachusetts Institute of Technology (MIT) - Sloan School of Management
Boston College - Carroll School of Management
Peter D. Wysocki
University of Miami - School of Business Administration
Journal of Accounting Research, Forthcoming
MIT Sloan Research Paper No. 4556-05
In this study, we examine whether managers delay disclosure of bad news relative to good news. If managers accumulate and withhold bad news up to a certain threshold, but leak and immediately reveal good news to investors, then we expect the magnitude of the negative stock price reaction to bad news disclosures to be greater than the magnitude of the positive stock price reaction to good news disclosures. We present evidence consistent with this prediction. Our analysis suggests that management, on average, delays the release of bad news to investors.
Number of Pages in PDF File: 54
Keywords: Bad News, Conservatism, Disclosure
JEL Classification: G14, G30, K22, M41, M45, D82, M40
Date posted: September 21, 2005 ; Last revised: April 27, 2012