Review of Accounting Studies

, Volume 11, Issue 1, pp 5–19

Stock Price Reaction to Evidence of Earnings Management: Implications for Supplementary Financial Disclosure

Original Article

DOI: 10.1007/s11142-006-6393-0

Cite this article as:
Baber, W.R., Chen, S. & Kang, SH. Rev Acc Stud (2006) 11: 5. doi:10.1007/s11142-006-6393-0


We condition security price reactions to quarterly earnings announcements on whether firms disclose supplementary balance sheet and/or cashflow information that can be used to estimate the consequences of earnings management. Disclosure of supplementary information is voluntary, and thus, we consider the possibility that firms that disclose balance sheet and/or cashflow information differ systematically from firms that do not disclose. Results indicate that investors discount evidence of earnings management at the disclosure date when supplementary information is disclosed. Such results indicate more informed earnings interpretations of quarterly earnings when firms provide balance sheet and/or cashflow information concurrently.


Earnings management Financial disclosure policy 

JEL Classifications

M41 M43 G14 

Copyright information

© Springer Science+Business Media, Inc. 2006

Authors and Affiliations

  • William R. Baber
    • 1
  • Shuping Chen
    • 2
  • Sok-Hyon Kang
    • 1
  1. 1.The George Washington University School of BusinessWashington, DCUSA
  2. 2.University of Washington Business SchoolSeattleUSA

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