Is Silence Golden? An Empirical Analysis of Firms that Stop Giving Quarterly Earnings Guidance in the Post Regulation-Fd Period*

Posted: 14 Sep 2005

See all articles by Shuping Chen

Shuping Chen

University of Texas at Austin - Red McCombs School of Business

Dawn A. Matsumoto

University of Washington - Department of Accounting

Shivaram Rajgopal

Columbia Business School

Date Written: September 12, 2005

Abstract

We investigate a sample of 75 firms that publicly renounced quarterly EPS guidance in the post-FD period (10/2000 to 10/2004). We find that stoppers have poor trailing earnings and stock return performance. We document an average -3.8% three-day return around the announcement to stop guidance and such reaction is associated with poor future performance and an increase in systematic risk. After the elimination of guidance, stock prices lead earnings less but there is no change in overall stock return volatility or analyst following. However, analyst forecast dispersion increases and forecast accuracy decreases following firms' decision to stop guiding.

Keywords: quarterly earnings guidance, stop guidance, cost of capital

JEL Classification: M41, M45, G12, G29

Suggested Citation

Chen, Shuping and Matsumoto, Dawn and Rajgopal, Shivaram, Is Silence Golden? An Empirical Analysis of Firms that Stop Giving Quarterly Earnings Guidance in the Post Regulation-Fd Period* (September 12, 2005). AAA 2006 Financial Accounting and Reporting Section (FARS) Meeting Paper. Available at SSRN: https://ssrn.com/abstract=803926

Shuping Chen (Contact Author)

University of Texas at Austin - Red McCombs School of Business ( email )

Austin, TX 78712
United States
521.471.5328 (Phone)

Dawn Matsumoto

University of Washington - Department of Accounting ( email )

224 Mackenzie Hall, Box 353200
Seattle, WA 98195-3200
United States
206-543-4454 (Phone)
206-685-9392 (Fax)

Shivaram Rajgopal

Columbia Business School ( email )

3022 Broadway
New York, NY 10027
United States

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