scholarly journals Does litigation change managers’ beliefs about the value of voluntarily disclosing bad news?

2021 ◽  
Author(s):  
Mary Brooke Billings ◽  
Matthew C. Cedergren ◽  
Svenja Dube
Keyword(s):  
Legal Liability ◽  
Good Faith ◽  
Bad News ◽  
Press Releases ◽  
Conference Calls ◽  
Consensus Forecasts ◽  
Legal Costs

AbstractResearch suggests that earnings-disclosure-related litigation causes managers to reduce subsequent disclosure, perhaps stemming from a belief that even their good faith disclosures will cause them trouble. This paper considers unexplored dimensions of disclosure and alternative channels of disclosure to provide additional evidence that speaks to how litigation shapes managers’ disclosure strategies. Consistent with Skinner (1994)’s classic legal liability hypothesis, we find that, while managers reduce and delay forecasts of positive earnings news following litigation, they increase the frequency and timeliness of their bad news forecasts. Moreover, many managers who were nonguiders prior to facing legal scrutiny begin guiding following litigation. Managers also maintain (if not increase) the information they provide via press releases and during conference calls following litigation. Supporting the notion that managers use disclosure to walk down expectations, additional analyses document an increase in the likelihood that lawsuit firms report earnings that beat consensus forecasts in the post-lawsuit period. Collectively, our evidence suggests that following litigation managers continue to view disclosure as a valuable tool that shapes their firms’ information environments and reduces expected legal costs. In so doing, it supports an important alternative viewpoint of how firms respond to litigation as well as the effectiveness of litigation as a disciplining mechanism.

The language of profit warnings: a case of denial, defiance, desperation and defeat

2021 ◽  
Vol 35 (9) ◽  
pp. 28-56
Author(s):  
Victoria C. Edgar ◽  
Niamh M. Brennan ◽  
Sean Bradley Power
Keyword(s):  
Text Analysis ◽  
Design Methodology ◽  
Corporate Communication ◽  
Bad News ◽  
Board Meeting ◽  
Conference Calls ◽  
Content Type ◽  
Three Stages ◽  
Delivering Bad News

PurposeTaking a communication perspective, the paper explores management's rhetoric in profit warnings, whose sole purpose is to disclose unexpected bad news.Design/methodology/approachAdopting a close-reading approach to text analysis, the authors analyse three profit warnings of the now-collapsed Carillion, contrasting the rhetoric with contemporaneous investor conference calls to discuss the profit warnings and board minutes recording boardroom discussions of the case company's precarious financial circumstances. The analysis applies an Aristotelian framework, focussing on logos (appealing to logic and reason), ethos (appealing to authority) and pathos (appealing to emotion) to examine how Carillion's board and management used language to persuade shareholders concerning the company's adverse circumstances.FindingsAs non-routine communications, the language in profit warnings displays and mimics characteristics of routine communications by appealing primarily to logos (logic and reason). The rhetorical profiles of investor conference calls and board meeting minutes differ from profit warnings, suggesting a different version of the story behind the scenes. The authors frame the three profit warnings as representing three stages of communication as follows: denial, defiance and desperation and, for our case company, ultimately, culminating in defeat.Research limitations/implicationsThe research is limited to the study of profit warnings in one case company.Originality/valueThe paper views profit warnings as a communication artefact and examines the rhetoric in these corporate documents to elucidate their key features. The paper provides novel insights into the role of profit warnings as a corporate communication vehicle/genre delivering bad news.

“Stiff Business Headwinds and Uncharted Economic Waters”: The Use of Euphemisms in Earnings Conference Calls

2021 ◽  
Author(s):  
Kate Suslava
Keyword(s):  
Market Reaction ◽  
Abnormal Returns ◽  
Bad News ◽  
Conference Calls ◽  
Investor Attention ◽  
Earnings Announcement ◽  
Negatively Associated ◽  
The Impact

This paper studies whether euphemisms obfuscate the content of earnings conference calls and cause investors to underreact. I argue that managers’ use of euphemisms can alleviate the impact of bad news and delay the market reaction to adverse information. Using a dictionary of corporate euphemisms, I find that their use by managers—but not by analysts—is negatively associated with both immediate and future abnormal returns, and their frequency moderates the negative market reaction to bad earnings news. Finally, stock underreaction is more pronounced on busy earnings announcement dates, when investor attention is distracted. This paper was accepted by Brian Bushee, accounting.

Australian wildfire litigation

2012 ◽  
Vol 21 (5) ◽  
pp. 488 ◽  
Author(s):  
Michael Eburn ◽  
Stephen Dovers
Keyword(s):  
New South ◽  
New South Wales ◽  
Legal Liability ◽  
Fire Service ◽  
Good Faith ◽  
Hazard Reduction ◽  
Inquiry Process ◽  
South Wales ◽  
History Analysis ◽  
Volunteer Firefighters

Legal liability is an issue that concerns volunteer firefighters and may affect the ability of fire managers to perform their tasks. There are calls to guarantee firefighters will not be personally liable for actions undertaken in good faith. This paper reviews post-wildfire litigation in Australia and claims for compensation made against the New South Wales Rural Fire Service. Although the data are incomplete and likely to underestimate the actual claims history, analysis of the available data does show that the number of claims for compensation is small given the very large number of fires and hazard reduction burns across Australia. There is no evidence of extensive post-fire litigation or of fire agencies or firefighters being held liable for actions taken in the course of firefighting The evidence does not support assertions that there is an ‘increasing flood’ of legal claims arising from firefighting. Post-fire litigation is compared with other proceeding such as Royal Commissions and coronial inquiries. It is argued that it is not liability, but the lengthy post-event inquiry process and the risk of personal criticism that should be the concern of fire managers and firefighters.

scholarly journals PROBLEMS OF CRIMINAL LAW EVALUATION OF PATENT TROLLING

2020 ◽  
Vol 30 (2) ◽  
pp. 282-288
Author(s):  
V.V. Rovneyko
Keyword(s):  
Criminal Law ◽  
Criminal Liability ◽  
Criminal Code ◽  
Good Faith ◽  
Judicial Practice ◽  
Legal Nature ◽  
Sufficient Degree ◽  
Legal Costs ◽  
The One ◽  
Abuse Of Law

The article deals with the issues of criminal law and legal assessment of patent trolling, which, on the one hand, is a kind of abuse of law and violation of the principle of good faith of participants in civil legal relations, and, on the other hand, has a sufficient degree of public danger and prevalence to be the basis of criminal liability. The author's conclusions are based on the study of media materials and judicial practice. Most of the “victims” of patent trolling pay money, not being mistaken about the legality of the claims, but being guided by the desire to avoid legal costs and other problems associated with litigation. Establishing the criminal legal nature of patent trolling is somewhat problematic, since it is a combination of fraud and extortion in the broad sense of these concepts. Signs of existing crimes, such as fraud (article 159 of the criminal code) and extortion (article 163 of the criminal code), contain definitions of these concepts in a narrow sense. This does not allow such actions to be classified as specified crimes.

Are Seemingly Self-Serving Attributions in Earnings Press Releases Plausible? Empirical Evidence

2013 ◽  
Vol 89 (2) ◽  
pp. 635-667 ◽  
Author(s):  
Michael D. Kimbrough ◽  
Isabel Yanyan Wang
Keyword(s):  
Attribution Theory ◽  
Poor Performance ◽  
Data Availability ◽  
Bad News ◽  
Specific Information ◽  
Press Releases ◽  
Cross Sectional ◽  
External Causes ◽  
Earnings Press Releases ◽  
Industry Peers

ABSTRACT Seemingly self-serving attributions either attribute favorable performance to internal causes (enhancing attributions) or poor performance to external causes (defensive attributions). Managers presumably provide such attributions in earnings press releases to heighten (dampen) investors' perceptions of the persistence of good (bad) earnings news, thereby increasing (decreasing) the market reward (penalty) for good (bad) earnings news. Building on attribution theory and prior research on earnings commonality, this study investigates cross-sectional differences in investors' responses to quarterly earnings press releases that contain seemingly self-serving attributions. Using a random sample of press releases from 1999 to 2005, we find that firms that provide defensive attributions to explain earnings disappointments experience less severe market penalties when: (1) more of the their industry peers also release bad news, and (2) their earnings share higher commonality with industry- and market-level earnings. On the other hand, firms that provide enhancing attributions to explain good earnings news reap greater market rewards when: (1) more of their industry peers release bad news, and (2) their earnings share lower commonality with industry- and market-level earnings. Collectively, our results demonstrate that investors neither ignore seemingly self-serving attributions nor accept them at face value, but rely on industry- and firm-specific information to assess their plausibility. Data Availability: Data are publicly available from the sources identified in the text.

Accounting Narratives

2019 ◽  
Author(s):  
Tracey J. Riley ◽  
Alex C. Yen
Keyword(s):  
Impression Management ◽  
Word Meaning ◽  
Poor Performance ◽  
Bad News ◽  
Financial Statement ◽  
Syntactic Analysis ◽  
Sentence Structure ◽  
Conference Calls ◽  
Corporate Websites ◽  
The Government

Although accounting is typically seen as a numbers-oriented discipline, with an emphasis on quantifying economic events and activity, the nexus of language and accounting, specifically the role of language in communicating corporate accounting results, has received an increasing amount of attention in recent years. This is because quantified accounting results (e.g., earnings per share, sales revenue) are rarely communicated in isolation. Rather, they are usually accompanied by a non-quantitative narrative, such as an earnings press release, a corporate annual report, or the president’s letter, which, along with conference calls and content at corporate websites, we collectively refer to as “accounting narratives.” These narratives allow management to elaborate on and contextualize the financial performance of the company. However, because they are not as extensively regulated as the financial statements and are not standardized, these narratives can also be used by companies for impression-management purposes, to obfuscate (poor) performance and to “spin” the financial results to the companies’ favor. Research into accounting narratives dates back to 1952 and has focused on a wide variety of features of narratives and on how those features affect financial statement readers’ (most notably, investors’) reactions. The earliest studies focused on accounting narratives’ readability by performing a syntactic analysis to assess the cognitive difficulty of written passages. This line of research has found that accounting narratives are syntactically complex and difficult to read and that management intentionally makes bad news less readable in order to strain the readers’ cognitive processes and lead to lower comprehension of the bad news. In addition to this evidence of obfuscation, researchers have found support for managers engaging in attributional framing, which is the tendency to attribute positive outcomes to actions within the company and negative outcomes to actions external to the company (e.g., the government or the weather) in an effort to influence readers’ perception of good versus bad news. More recently, researchers have found that managers use syntactic (sentence structure), semantic (word meaning), and metasemantic (abstract versus concrete construal) manipulation and make broad stylistic choices such as emphasis, length, and scenario form. In terms of how those features affect the readers of the narratives, readers (most notably, investors) have been shown to respond to length and readability; level of negativity; words pertaining to risk, uncertainty, credibility, commitment, and responsibility; justifications of excuses of poor performance; optimistic and pessimistic tone; vivid versus pallid language; internal versus external attributions; and use of self-references.

Legal Liability Coverage and Voluntary Disclosure

2008 ◽  
Vol 83 (6) ◽  
pp. 1639-1669 ◽  
Author(s):  
Jinyoung Park Wynn
Keyword(s):  
Voluntary Disclosure ◽  
Insurance Coverage ◽  
Legal Liability ◽  
Bad News ◽  
Litigation Risk ◽  
Disclosure Decisions ◽  
Excess Cash ◽  
Litigation Cost ◽  
Directors And Officers ◽  
Insurance Data

ABSTRACT: This paper examines whether legal liability coverage, as measured by excess Directors’ and Officers’ (D&O) liability insurance coverage and excess cash for indemnification, is associated with the quantity and the quality of a firm’s voluntary disclosures. Using Canadian firms whose D&O insurance data are publicly available, I find that firms with higher excess coverage are less likely to report bad news forecasts for the sample firms that are cross-listed in the U.S., and that the number of bad news forecasts decreases for large cross-listed sample firms having high litigation risk. The results are consistent with the litigation cost argument for the disclosure of bad news. I also find that higher excess liability coverage leads to disclosures of more precise bad news for the cross-listed sample firms and less timely disclosures of bad news for large cross-listed sample firms. Further, excess cash for indemnification is a more significant determinant of disclosure decisions.

scholarly journals Communicating in Good Faith? Dynamics of the Christian Right Agenda

2020 ◽  
Vol 13 (2) ◽  
pp. 385-414 ◽  
Author(s):  
Angelia R. Wilson ◽  
Paul A. Djupe
Keyword(s):  
Conditional Independence ◽  
Research Council ◽  
Communication Channels ◽  
Good Faith ◽  
Elected Officials ◽  
Press Releases ◽  
Data Set ◽  
Organized Interests ◽  
The Family ◽  
Issue Content

AbstractIt is an article of faith that organized interests represent members to elected officials making use of synchronized communication channels. Rarely, if at all, have researchers had access to multiple, internal, and external channels to test this notion. We mine a trove of nearly 2,500 emails the Family Research Council (FRC) sent to list subscribers from 2007 to 2018. Text tools allow us to depict message flexibility of the FRC. We then consider how internal and external messages may be linked by examining the issue content of emails in relation to press releases. Finally, we note the bills lobbied by FRC and the frequency these are mentioned in the internal email messages. Our findings are twofold. First, they support the conditional independence of communication channels in ways that appear to conform to the requisites of the different audiences: elected officials are likely mobilized by different signals than members are. Second, our evidence shows that the flexibility organized interests have in composing their communications can mean that different audiences are presented with considerably different political agendas. While FRC has significant sophisticated message flexibility, our data set indicates that such flexibility can raise serious concerns about good faith representation.

Voluntary Disclosure to Influence Investor Reactions to Merger Announcements: An Examination of Conference Calls

2011 ◽  
Vol 86 (2) ◽  
pp. 637-667 ◽  
Author(s):  
Michael D. Kimbrough ◽  
Henock Louis
Keyword(s):  
Content Analysis ◽  
Private Information ◽  
Voluntary Disclosure ◽  
Press Releases ◽  
Conference Calls ◽  
Market Reactions ◽  
Related Information ◽  
Announcement Returns ◽  
Favorable Reaction ◽  
Merger Announcements

ABSTRACT: We find that bidders are more likely to hold conference calls at merger announcements when the mergers are financed with stock and when the transactions are large. After controlling for endogeneity, we also find that conference calls are associated with more favorable market reactions to merger announcements. A content analysis of merger-related information releases for a limited subsample indicates that the more favorable reaction is related to the fact that, compared to press releases, conference calls provide a greater volume of information and place greater emphasis on forward-looking details. We find no evidence that the superior announcement returns associated with conference calls subsequently reverse or that conference calls are positively associated with pre-merger announcement abnormal accruals. Overall, the results suggest that managers use conference calls around merger announcements to credibly convey favorable private information to the market.

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