scholarly journals Information Externalities and Voluntary Disclosure: Evidence from a Major Customer's Earnings Announcement

2020 ◽  
Vol 95 (6) ◽  
pp. 73-96
Author(s):  
Young Jun Cho ◽  
Yongtae Kim ◽  
Yoonseok Zang
Keyword(s):  
Supply Chain ◽  
Voluntary Disclosure ◽  
Data Availability ◽  
Earnings Guidance ◽  
Future Prospects ◽  
Earnings Announcement ◽  
Supply Chain Relationships ◽  
Information Transfers ◽  
Positive Effect

ABSTRACT We examine the relation between information externalities along the supply chain and voluntary disclosure. Information transfers from a major customer's earnings announcement (EA) can substitute for its supplier's disclosure. Conversely, if the customer's EA increases uncertainties regarding the supplier's future prospects, it can increase the demand for disclosure. After controlling for information incorporated in supplier returns, we find that the supplier is more likely to issue earnings guidance after the customer's EA when the EA news deviates more from the market's expectation. The positive effect of the customer's news on earnings guidance is weaker when common investors, supply-chain analysts, or a common industry allow investors to better understand the value implications of the news, while the effect increases with the importance of the customer to the supplier. The effect is also stronger when EA news is negative rather than positive. Collectively, the results suggest that supply-chain relationships influence voluntary disclosure. Data Availability: All data are publicly available from sources indicated in the text.

Disaggregating Management Forecasts to Reduce Investors’ Susceptibility to Earnings Fixation

2011 ◽  
Vol 86 (1) ◽  
pp. 185-208 ◽  
Author(s):  
W. Brooke Elliott ◽  
Jessen L. Hobson ◽  
Kevin E. Jackson
Keyword(s):  
Voluntary Disclosure ◽  
Experimental Results ◽  
Management Forecasts ◽  
Net Income ◽  
Earnings Guidance ◽  
Earnings Announcement ◽  
Management Forecast ◽  
Important Input ◽  
Potential Alternative ◽  
Management Disclosures

ABSTRACT: This study examines disaggregated management forecasts as a mechanism to reduce investors’ fixation on announced earnings. Our experimental results suggest that investors’ earnings fixation is reduced when they initially observe a disaggregated management forecast (earnings and its components) versus when they observe an aggregated forecast (earnings only). We also provide theory-consistent evidence that this reduction in earnings fixation is associated with investors interpreting the summary net income figure as one of several similarly important evaluation inputs rather than a substantially more important input (relative to its components). Finally, we provide evidence that suggests our results are not bounded by the level of emphasis on net income in the subsequent earnings announcement, and not fully explained by three plausible alternative explanations. Our study extends the voluntary disclosure literature by providing evidence that the form of management disclosures can influence investors’ interpretation of subsequently announced information, and contributes to practice by providing a potential alternative to stopping earnings guidance.

Characteristics and Implications of Long-Term Earnings Guidance

2020 ◽  
Vol 6 (1) ◽  
pp. 33-54
Author(s):  
Andrew C. Call ◽  
Adam M. Esplin ◽  
Bin Miao
Keyword(s):  
Voluntary Disclosure ◽  
Earnings Forecasts ◽  
Data Availability ◽  
Real Earnings Management ◽  
Limited Attention ◽  
Earnings Guidance ◽  
Short Term ◽  
Operating Environments ◽  
Growth Forecasts

ABSTRACT We examine a form of voluntary disclosure that has received limited attention to date, namely, managers' long-term guidance for earnings three to five years in advance. We identify 1,739 long-term earnings forecasts issued by 295 unique firms from 2000 to 2012 and find that relative to firms that issue only short-term earnings guidance, those that also issue long-term guidance are larger, have more certain operating environments, and are followed by analysts who are more likely to issue long-term growth forecasts. Long-term guidance is informative to investors and analysts incorporate the news contained in these forecasts into their own long-term growth forecasts. We also document that the issuance of long-term guidance is associated with more (less) investor focus on long-term (short-term) earnings news. Last, we find mixed evidence on the association between long-term guidance and real earnings management decisions. Our study adds to the literature on managers' voluntary disclosure choices. Data Availability: Data are available from the public sources cited in the text. JEL Classifications: G17; M41.

How Patterns of Past Guidance Provision Affect Investor Judgments: The Joint Effect of Guidance Frequency and Guidance Pattern Consistency

2017 ◽  
Vol 93 (3) ◽  
pp. 327-348 ◽  
Author(s):  
Michael Tang ◽  
Shankar Venkataraman
Keyword(s):  
Empirical Research ◽  
Voluntary Disclosure ◽  
Joint Effect ◽  
Two Dimensions ◽  
Data Availability ◽  
Earnings Guidance ◽  
Managerial Opportunism ◽  
Investor Judgments ◽  
Historical Pattern ◽  
Shed Light

ABSTRACT Theory suggests that the provision of voluntary disclosure, in itself, is informative to investors, but prior empirical research largely focuses on investors' reaction to the content of disclosure. We extend the literature on earnings guidance by experimentally examining how investors react to a firm's historical pattern of guidance provision, holding constant guidance content. We manipulate two dimensions of guidance provision—how often guidance is provided (frequency), and whether guidance is provided for the same quarter(s) across consecutive years (pattern consistency). We find that consistency positively impacts investors' confidence and likelihood of investing because investors associate consistency with lesser managerial opportunism, but consistency matters only when frequency is low. Our results shed light on an important dimension of guidance provision unexamined in prior research—guidance consistency—and highlight when it can influence investor judgments even when key elements of a firm's historical guidance content are held constant. Data Availability: Contact the authors.

Revealing Future Prospects without Forecasts: The Case of Accelerating Material Contract Filings

2013 ◽  
Vol 88 (5) ◽  
pp. 1769-1804 ◽  
Author(s):  
Edward Xuejun Li
Keyword(s):  
Voluntary Disclosure ◽  
Market Competition ◽  
Cost Benefit ◽  
Data Availability ◽  
Management Forecasts ◽  
Future Prospects ◽  
Conference Calls ◽  
The Public ◽  
Proprietary Cost ◽  
Forward Looking

ABSTRACT: Extant research on voluntary disclosure about future prospects has focused on two forward-looking disclosure mechanisms: management forecasts and conference calls. This study examines the accelerated filing of material contracts as another type of future-related disclosure that involves no forecasting. I find that firms are more likely to accelerate material contract filings when forward-looking disclosures could lack credibility or arouse litigation concerns. However, for proprietary cost considerations, firms delay contract filings when facing high (low) product market competition from incumbents (potential entrants). I also find that accelerated contract filing is incrementally associated with lower information asymmetry. Overall, while presenting a cost-benefit trade-off that is distinctly different from forward-looking disclosures, accelerated contract filing is an important alternative channel through which firms communicate future prospects to investors. Data Availability: The data used in this study are available from the public sources identified in the paper. Contact the author for any specific data requests.

Do Managers Disclose or Withhold Bad News? Evidence from Short Interest

2018 ◽  
Vol 94 (3) ◽  
pp. 1-26 ◽  
Author(s):  
Dichu Bao ◽  
Yongtae Kim ◽  
G. Mujtaba Mian ◽  
Lixin (Nancy) Su
Keyword(s):  
Private Information ◽  
Voluntary Disclosure ◽  
Stock Price ◽  
Data Availability ◽  
Bad News ◽  
General Tendency ◽  
Litigation Risk ◽  
Novel Approach ◽  
Conflicting Evidence ◽  
Short Interest

ABSTRACT Prior studies provide conflicting evidence as to whether managers have a general tendency to disclose or withhold bad news. A key challenge for this literature is that researchers cannot observe the negative private information that managers possess. We tackle this challenge by constructing a proxy for managers' private bad news (residual short interest) and then perform a series of tests to validate this proxy. Using management earnings guidance and 8-K filings as measures of voluntary disclosure, we find a negative relation between bad-news disclosure and residual short interest, suggesting that managers withhold bad news in general. This tendency is tempered when firms are exposed to higher litigation risk, and it is strengthened when managers have greater incentives to support the stock price. Based on a novel approach to identifying the presence of bad news, our study adds to the debate on whether managers tend to withhold or release bad news. Data Availability: Data used in this study are available from public sources identified in the study.

An Investigation of Justice in supply chain relationships and their performance impact

2013 ◽  
Vol 31 (5) ◽  
pp. 236-247 ◽  
Author(s):  
Ram Narasimhan ◽  
Sriram Narayanan ◽  
Ravi Srinivasan
Keyword(s):  
Supply Chain ◽  
Performance Impact ◽  
Supply Chain Relationships

scholarly journals We've got the power! How customer power affects supply chain relationships

2008 ◽  
Vol 51 (3) ◽  
pp. 169-174 ◽  
Author(s):  
Barbara B. Flynn ◽  
Xiande Zhao ◽  
Baofeng Huo ◽  
Jeff Hoi Yan Yeung
Keyword(s):  
Supply Chain ◽  
Supply Chain Relationships
Sign in / Sign up

Export Citation Format

Share Document