Earnings Preannouncement Strategies, Review of Accounting Studies
We examine the disclosure strategies managers follow when they "preannounce" quarterly earnings shortly before formal earnings announcements. We document that managers with bad news release essentially all of their news at the preannouncement date, while managers with good news only release about half of their news. Controlling for the combined news released at the preannouncement and earnings announcement dates, firms with negative earnings announcement surprises have significantly lower excess returns for the period from just before the preannouncement to just after the earnings announcement. This finding is consistent with the observed disclosure strategies whereby managers attempt to avoid negative earnings announcement surprises, and suggests that how information is presented can affect the market's reaction to that information.
Leonard Soffer, S.Ramu Thiagarajan, Beverly Walther
Soffer, Leonard, S.Ramu Thiagarajan, and Beverly Walther. 2000. Earnings Preannouncement Strategies. Review of Accounting Studies. 5(1): 5-26.