Do Managers Withhold Bad News?
54 Pages Posted: 21 Sep 2005 Last revised: 27 Apr 2012
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.
Keywords: Bad News, Conservatism, Disclosure
JEL Classification: G14, G30, K22, M41, M45, D82, M40
Suggested Citation: Suggested Citation