Corporate goodness and profit warnings

Ajit Dayanandan (), Han Donker () and John Nofsinger ()
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Ajit Dayanandan: University of Alaska Anchorage
Han Donker: University of Alaska Anchorage
John Nofsinger: University of Alaska Anchorage

Review of Quantitative Finance and Accounting, 2018, vol. 51, issue 2, No 10, 553-573

Abstract: Abstract Is a firm that is known for positively engaging stakeholders expected to voluntarily disclose bad financial news? If it makes the announcement, does its corporate goodness help to mitigate the stock price reaction? We examine these issues using a sample of profit warnings, and a sample of firms with negative earnings surprises that did not warn. Firms that have positive corporate social responsibility ratings are more likely to provide earnings warnings than other firms. When they do provide a profit warning, the event negative abnormal returns are of significantly smaller magnitude than the returns of other firms providing warnings. This effect does not occur for social firms that decide not to warn. They suffer the same negative stock price impact on the earnings announcement day as other firms.

Keywords: Profit warnings; Corporate social responsibility; Socially responsible investing (search for similar items in EconPapers)
JEL-codes: G14 G32 G4 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (4)

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DOI: 10.1007/s11156-017-0680-7

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