Shareholder Litigation and Corporate Disclosures

Francis, Jennifer; Philbrick, Donna R.; Schipper, Katherine

doi:10.2307/2491279

Cited by 1,212 publications

(667 citation statements)

References 20 publications

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“…Empirical evidence on the relation between disclosure and litigation costs is mixed. Skinner (1994) finds that firms are more likely to pre-disclose earnings in anticipation of adverse earnings news, whereas Francis et al (1994) find no evidence that disclosures are effective in deterring litigation. Research also finds that litigation costs are higher in high-technology industries (e.g.…”

Section: Proprietary? Costs Litigation Costs and Disclosures Of Innmentioning

confidence: 96%

Disclosure of innovation activities by high-technology firms

2003

Asia-Pacific Journal of Accounting & Economics

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This study investigates management incentive to disclose non-GAAP indicators concerning innovation in high-technology industries and the usefulness of the disclosure. As predicted, we find that firms increase disclosures of innovation when current earnings are less informative, or when future earnings are more uncertain. This finding is consistent with firms increasing disclosure in response to investor information demands when accounting data are less useful in assessing firm value. We also find that disclosures of innovation contain price-sensitive news. In addition, we find that disclosures of innovation are positively associated with the firm's future sales growth, profitability, and stock returns, after controlling for current performance and other factors known to influence future performance. This evidence is consistent with management disclosure conveying valuerelevant information that is not reflected in current performance, but is predictive of future performance. © City University of Hong Kong. JEL Classification: M41 and O31

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Section: Proprietary? Costs Litigation Costs and Disclosures Of Innmentioning

confidence: 96%

Disclosure of innovation activities by high-technology firms

2003

Asia-Pacific Journal of Accounting & Economics

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“…Proprietary information might be revealed by the disclosure (e.g., Dontoh [1989]), and forward-looking disclosures expose managers to loss of reputation and potential litigation if the disclosure turns out to be inaccurate (Francis, Philbrick, and Schipper [1994], Skinner [1994Skinner [ , 1997). Because demand for forward-looking disclosure is likely to vary both across firms and through time and the costs of disclosure are potentially high, managers are likely to supply it only when the benefits of meeting demand exceed the costs of disclosure.…”

Section: Forecast Preconditions Forecast Characteristics and Voluntmentioning

confidence: 99%

Why Do Managers Explain Their Earnings Forecasts?

2004

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Managers often explain their earnings forecasts by linking forecasted performance to their internal actions and the actions of parties external to the firm. These attributions potentially aid investors in the interpretation of management forecasts by confirming known relationships between attributions and profitability or by identifying additional causes that investors should consider when forecasting earnings. We investigate why managers choose to provide attributions with their forecasts and whether the attributions are related to security price reactions to management earnings forecasts. Using a sample of 951 management earnings forecasts issued from 1993 to 1996, we find that attributions are more likely for larger firms, less likely for firms in regulated industries, less likely for forecasts issued over longer horizons, more likely for bad news forecasts, and more likely for forecasts that are maximum type. Furthermore, attributions are associated with greater absolute price reactions to management forecasts, more negative price reactions to management forecasts (forecast news held constant), and a greater price reaction per dollar of * University of Georgia; †Indiana University; ‡Harvard University. We thank Andrea Astill, Ben Ayers, Linda Bamber, Dave Barrett, Neil Bhattacharya, Walt Blacconiere, Christine Botosan, Claire Bush, Jenny Gaver, Ken Gaver, Eric Lie, Laureen Maines, Roger Martin, Marlene Plumlee, Jamie Pratt, Aamer Sheikh, Kimberly Smith, David Upton, Jim Wahlen, Wanda Wallace, Isabel Wang, an anonymous referee, and workshop participants at the University of Utah, Indiana University, the University of Georgia, the University of Missouri, the College of William and Mary, and Louisiana State University for comments on earlier versions of this paper. We also gratefully acknowledge the contribution of IBES International Inc. for providing earnings per share forecast data. These data have been provided as part of a broad academic program to encourage earnings expectations research. unexpected earnings. Our findings hold after control for the aforementioned determinants of attributions and after control for other firm-and forecastspecific variables that are often associated with security prices.

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“…In contrast, when actual earnings exceed their targets, firms may take more time before the earnings are announced. Francis et al (1994) suggest that since litigation is more likely when stock prices run up and then subsequently decline, managers and auditors have a good reason to spend more time verifying good news that precedes a stock price run up, possibly leading to a delay in the formal announcement of good earnings news. This prediction suggests a longer delay for better news than for good news.…”

Section: B Earnings Announcement Timingmentioning

confidence: 99%

“…However, once earnings exceed the market expectation, litigation risk may delay the earnings announcement because managers want to take more time to verify any good news that precedes a stock price run up to avoid possible litigation (Begley & Fischer, 1998). Unexpectedly high earnings this one year may lead to sudden drops in earnings the following years, and lawsuits generally follow a stock price run up and subsequent large decline (Francis et al, 1994).…”

Section: ⅰ Introductionmentioning

confidence: 99%

The Association between Earnings News and The Timing of Annual Earnings Announcements

Kim¹,

Son²

2014

Glob Bus Financ Rev

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A B S T R A C TThis study examines whether managers exercise discretion in the timing of annual earnings announcements depending on the magnitude of unexpected earnings. We find a non-linear association between the timing of the earnings announcement and the amount of unexpected earnings. Specifically, managers tend to delay annual earnings announcements as the news becomes worse (better) in negative (positive) unexpected earnings. We also find that market returns on the magnitude of earnings surprises (Earnings Response Coefficient) are greater with the timely announcement of earnings only when firms miss their expected earnings.

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Shareholder Litigation and Corporate Disclosures

Cited by 1,212 publications

References 20 publications

Disclosure of innovation activities by high-technology firms

Disclosure of innovation activities by high-technology firms

Why Do Managers Explain Their Earnings Forecasts?

The Association between Earnings News and The Timing of Annual Earnings Announcements

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