Review of Accounting Studies

, Volume 5, Issue 1, pp 5–26 | Cite as

Earnings Preannouncement Strategies

  • Leonard C. Soffer
  • S. Ramu Thiagarajan
  • Beverly R. Walther


We examine the disclosure strategies managers follow when theyd “preannounce” quarterly earnings shortly before formal earnings announcements. We document that managers with bad news release essentially all of their news at the preannouncement date, while managers with good news only release about half of their news. Controlling for the combined news released at the preannouncement and earnings announcement dates, firms with negative earnings announcement surprises have significantly lower excess returns for the period from just before the preannouncement to just after the earnings announcement. This finding is consistent with the observed disclosure strategies whereby managers attempt to avoid negative earnings announcement surprises, and suggests that how information is presented can affect the market's reaction to that information.

Preannouncements Earnings Announcements Disclosure Market Reaction 


Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.


  1. Ajinkya, B. and M. Gift. (1984). “Corporate Managers' Earnings Forecasts and Symmetrical Adjustments of Market Expectations.” Journal of Accounting Research 22, 425–444.Google Scholar
  2. Baginski, S., J. Hassell, and G. Waymire. (1994). “Some Evidence on the News Content of Preliminary Earnings Estimates.” Accounting Review 69, 265–273.Google Scholar
  3. Burgstahler, D. and I. Dichev. (1997). “Earnings Management to Avoid Earnings Decreases and Losses.” Journal of Accounting and Economics 24, 99–126.Google Scholar
  4. Cox, C. (1985). “Further Evidence on the Representativeness of Management Earnings Forecasts.” Accounting Review 60, 692–701.Google Scholar
  5. Degeorge, F., J. Patel, and R. Zeckhauser. (1999). “Earnings Management to Exceed Thresholds.” Journal of Business 72, 1–33.Google Scholar
  6. Foster, G. (1973). “Stock-Market Reaction to Estimates of Earnings-Per-Share by Company Officials.” Journal of Accounting Research 11, 25–37.Google Scholar
  7. Francis, J., D. Philbrick, and K. Schipper. (1994). “Shareholder Litigation and Corporate Disclosures.” Journal of Accounting Research 32, 137–164.Google Scholar
  8. Kasznik, R. and B. Lev. (1995). “To Warn or Not to Warn: Management Disclosures in the Face of an Earnings Surprise.” Accounting Review 70, 113–134.Google Scholar
  9. Kile, C., G. Pownall, and G. Waymire. (1998). “How Frequently Do Managers Disclose Prospective Earnings Information?” Journal of Financial Statement Analysis 3, 5–16.Google Scholar
  10. King, R., G. Pownall, and G. Waymire. (1990). “Expectations Adjustment via Timely Management Forecasts: Review, Synthesis, and Suggestions for Future Research.” Journal of Accounting Literature 9, 113–144.Google Scholar
  11. Lev, B. and S. Penman (1990). “Voluntary Forecast Disclosure, Nondisclosure, and Stock Prices.” Journal of Accounting Research 28, 49–75.Google Scholar
  12. Libby, R. and H. Tan. (1999). “Analysts' Reactions to Warnings of Negative Earnings Surprises.” Forthcoming, Journal of Accounting Research 37.Google Scholar
  13. Shu, S. “Firms' Discretionary Disclosure Choices in the Face of Imminent Earnings Disappointments.” Working Paper, University of Rochester, 1998.Google Scholar
  14. Skinner, D. (1994). “Why Firms Voluntarily Disclose Bad News.” Journal of Accounting Research 32, 38–60.Google Scholar
  15. Skinner, D. (1997). “Earnings Disclosures and Stockholder Lawsuits.” Journal of Accounting and Economics 23, 249–282.Google Scholar
  16. Waymire, G. (1985). “EarningsVolatility andVoluntary Management Forecast Disclosure.” Journal of Accounting Research 23, 268–295.Google Scholar

Copyright information

© Kluwer Academic Publishers 2000

Authors and Affiliations

  • Leonard C. Soffer
    • 1
  • S. Ramu Thiagarajan
    • 2
  • Beverly R. Walther
    • 1
  1. 1.Department of Accounting and Information SystemsNorthwestern UniversityEvanston
  2. 2.Mellon Capital Management CorporationSan Francisco

Personalised recommendations