This study uses archival data to identify the determinants of firms' decision to provide disaggregated earnings guidance. Of the S&P 500 firms that issue annual earnings guidance, 38.8% also provide annual guidance for sales and operating costs (disaggregated earnings guidance). We find that the likelihood of issuing components of earnings guidance is associated with good news earnings guidance, favorable forthcoming sales performance, low value relevance of earnings, high institutional ownership, and high analyst following. These findings suggest that guidance disaggregation is primarily associated with enhancing the credibility of good news earnings guidance and responding to the demand for additional disclosures. We further observe that 59.1% of our sample firms that provide earnings guidance continue their respective guidance disaggregation practice in the following year, suggesting that the practice is somewhat sticky.

Firms enjoy a wide degree of discretion in their disclosure of patent-related events, which investors generally view as “good news” announcements. This study examines patent disclosure behavior before earnings announcements in light of managers’ incentives to avoid the stock price-related consequences of earnings disappointments. The results suggest that for a sample that consists of predominately small-cap, high-tech firms, the likelihood of disclosing a patent strategically before an impending negative earnings surprise announcement increases in the magnitude of the negative earnings surprise. Further, such strategic patent disclosure appears to successfully dampen the market response to the earnings announcement. Overall, the empirical findings suggest that some firms engage in the strategic voluntary disclosure of proprietary information in order to manage their short-term stock prices before an adverse information event.