Management Forecasting Behavior Following Public News Events

Sadka, G and Sandhu, G and Sivaramakrishnan, K (2022) Management Forecasting Behavior Following Public News Events. Working Paper. SSRN.

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We examine how managers adapt their disclosure behavior in response to (public) news shocks not anticipated by them. The extent to which such events would affect subsequent disclosure is a function of the nature of the news---whether it represents ``good'' or ``bad'' news, and whether the news is industry-wide or firm-specific. Appealing to extant disclosure theories, we posit that firm-level and industry-level news events have different implications for the forecasting behavior of firms. We identify firm-level and industry-level news shocks from quarterly stock-returns data and find that the average firm is less likely to issue a forecast if it is a firm-level shock (positive and negative). However, we find a positive association between industry-level shock (positive and negative) and managers’ forecasting propensity. In addition, firms show a greater propensity to meet or exceed analyst consensus following positive shocks and to report a shortfall following negative shocks (firm- and industry-level).

Item Type: Monograph (Working Paper)
Subjects: Accounting
Date Deposited: 29 Aug 2023 10:23
Last Modified: 29 Aug 2023 10:23

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