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Full-Text Articles in Business
Does The Cessation Of Quarterly Earnings Guidance Reduce Investors’ Short-Termism?, Yongtae Kim, Lixin (Nancy) Su, Xindong (Kevin) Zhu
Does The Cessation Of Quarterly Earnings Guidance Reduce Investors’ Short-Termism?, Yongtae Kim, Lixin (Nancy) Su, Xindong (Kevin) Zhu
Accounting
The practice of providing quarterly earnings guidance has been criticized for encouraging investors to fixate on short-term earnings and encouraging managerial myopia. Using data from the post–Regulation Fair Disclosure period, we examine whether the cessation of quarterly earnings guidance reduces short-termism among investors. We show that, after guidance cessation, investors in firms that stop quarterly guidance are composed of a larger (smaller) proportion of long-term (short-term) institutions, put more (less) weight on long-term (short-term) earnings in firm valuation, become more (less) sensitive to analysts’ long-term (short-term) earning forecast revisions, and are less likely to dismiss chief executive officers for missing …
Are All Management Earnings Forecasts Created Equal? Expectations Management Versus Communication, Yongtae Kim, Myung Seok Park
Are All Management Earnings Forecasts Created Equal? Expectations Management Versus Communication, Yongtae Kim, Myung Seok Park
Accounting
Recent studies associate management earnings forecasts (MEFs) with expectations management. These studies, however, neither provide evidence on the extent and scope of expectations management through MEFs nor consider alternative incentives for issuing MEFs. Consequently, existing evidence does not help regulators assess whether MEFs effectively facilitate communication with investors. We investigate to what extent managers exploit their earnings forecasts as a tool of expectations management or as a communication device. By examining relations among MEFs, analysts' forecasts, and actual earnings, we classify MEFs into three incentive categories: (1) expectations management, (2) communication, and (3) other incentives. We find that a significant …
Bankruptcy Probability Changes And The Differential Informativeness Of Bond Upgrades And Downgrades, Yongtae Kim, Sandeep Nabar
Bankruptcy Probability Changes And The Differential Informativeness Of Bond Upgrades And Downgrades, Yongtae Kim, Sandeep Nabar
Accounting
Prior studies have found that stock returns around announcements of bond upgrades are insignificant, but that stock prices respond negatively to announcements of bond downgrades. This asymmetric stock market reaction suggests either that bond downgrades are timelier than upgrades, or that voluntary disclosures by managers preempt upgrades but not downgrades. This study investigates these conjectures by examining changes in firms' probabilities of bankruptcy (assessed using bankruptcy prediction models) and voluntary disclosure activity around rating change announcements. The results indicate that the assessed probability of bankruptcy decreases before bond upgrades, but not after. By contrast, the assessed probability of bankruptcy increases …