Download this Paper Open PDF in Browser

Is Silence Golden? An Empirical Analysis of Firms that Stop Giving Quarterly Earnings Guidance

57 Pages Posted: 13 Oct 2005  

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

Multiple version iconThere are 2 versions of this paper

Date Written: October 2006

Abstract

We investigate a sample of 96 firms that publicly renounced quarterly EPS guidance in the post-FD period (10/2000 to 1/2006). We find that stoppers have poor trailing stock return performance and lower institutional ownership. We document an average -4.8% three-day return around the announcement to stop guidance and this reaction is associated with poor future performance. 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, despite increased disclosures made in earnings press releases.

Keywords: Earnings guidance, stop guidance, cost of capital

JEL Classification: A10, D21, D80, G14, K40, K41, M10, M20, M41

Suggested Citation

Chen, Shuping and Matsumoto, Dawn A. and Rajgopal, Shivaram, Is Silence Golden? An Empirical Analysis of Firms that Stop Giving Quarterly Earnings Guidance (October 2006). Available at SSRN: https://ssrn.com/abstract=820644 or http://dx.doi.org/10.2139/ssrn.820644

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

Paper statistics

Downloads
2,317
Rank
4,478
Abstract Views
8,436