The relative concentration of bad versus good news flows
Norman C Strong and
LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library
This paper examines flows of bad and good news as a feature of the firm’s information environment. We argue that to the extent that managers delay reporting bad news, this leads to bad news being more concentrated. Measuring flows of bad and good news using flows of negative and positive abnormal stock returns, we find that firms with higher volatility of operations and managerial incentives to withhold bad news exhibit relatively more concentrated bad news flows. This relative concentration is also positively associated with lower earnings quality and a higher risk of shareholder litigation. Our results suggest that the relative concentration of bad and good news flows is related to the quality of the firm’s information environment.
JEL-codes: R14 J01 M40 (search for similar items in EconPapers)
Pages: 64 pages
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:60139
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