Getting Bad News Out Early: Does it Really Help Stock Prices?

42 Pages Posted: 13 Jan 2004

See all articles by Chris Downing

Chris Downing

BlackRock

Steven A. Sharpe

Board of Governors of the Federal Reserve System

Date Written: February 9, 2007

Abstract

We examine the stock price benefit of meeting or beating earnings expectations. Using a general methodology, we find no compelling evidence that the timing of earnings news benefits firms' stock returns. Our results appear to overturn the findings of previous authors who, using less general methodologies, have suggested that firms can boost their stock returns by getting bad news out early. Our results are robust across time periods, for different scaling factors on earnings, when controlling for firm size and growth prospects, and when conditioned on past earnings news.

Keywords: Analyst forecasts, earnings management, expectations management

JEL Classification: G12, G14, G29, M41

Suggested Citation

Downing, Christopher T. and Sharpe, Steven A., Getting Bad News Out Early: Does it Really Help Stock Prices? (February 9, 2007). FEDS Research Paper, Available at SSRN: https://ssrn.com/abstract=962350 or http://dx.doi.org/10.2139/ssrn.962350

Christopher T. Downing (Contact Author)

BlackRock ( email )

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Steven A. Sharpe

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States
202-452-2875 (Phone)
202-452-3819 (Fax)

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