Voluntary Disclosures and Earnings Surprises: The Case of High-Tech Firms in Periods of Bad Economic News

John Shon

Accounting & Taxation, 2009, vol. 1, issue 1, 1-13

Abstract: In this study, I examine the voluntary disclosure behavior of high-tech firms experiencing bad economic news. I create a sample of 100 randomly-selected firm-quarters with negative returns—but not necessarily negative earnings surprises. I find that: (i) the unconditional relation between earnings surprises and voluntary disclosures is non-existent in this setting where negative stock returns are controlled for, but (ii) firms with negative earnings surprises make forward-looking statements with more negative information content—but only when conditioned on firm size or growth opportunities. Sample selection procedures can therefore affect inferences drawn from voluntary disclosure behavior documented in extant studies. Conditional analysis reveals how the earnings-disclosure relation crosssectionally varies with firms’ economic characteristics.

Keywords: Voluntary disclosures; earnings surprise; bad economic news; litigation risk (search for similar items in EconPapers)
JEL-codes: D82 M40 (search for similar items in EconPapers)
Date: 2009
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