The Impact of Securities Litigation Reform on the Disclosure of Forward-Looking Information by High Technology Firms

Johnson, Michael D.; Kasznik, Ron; Nelson, Karen K.

doi:10.2139/ssrn.59248

Cited by 140 publications

(170 citation statements)

References 20 publications

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“…10 However, evidence on whether forecast frequency has increased over time is mixed. Johnson et al (2001) find more firms issue forecasts and firms issue more forecasts since the passage of the PSLRA, but Warner (2006) finds that forecast frequency decreased following the SarbanesOxley Act of 2002.…”

Section: The Effect Of Forecast Frequency On the Fercmentioning

confidence: 99%

Do management EPS forecasts allow returns to reflect future earnings? Implications for the continuation of management’s quarterly earnings guidance

et al. 2010

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Using 18,253 firm-year observations from 1998 through 2003, we build on literature suggesting that more informative disclosures allow returns to better reflect future earnings and test whether management earnings per share forecasts and their characteristics influence the future earnings response coefficient (FERC). We find that FERCs are greater for forecasting firms and when forecasts are more frequent or precise. We suggest that more frequent and more precise forecasts assist investors in better predicting future earnings. Importantly, we find that quarterly and short-term forecasts incrementally increase the association between returns and future earnings beyond annual and long-term forecasts; thus, even short-term, quarterly forecasts allow investors to form better expectations about future earnings. This suggests a benefit of quarterly earnings forecasts possibly overlooked in recommendations from the United States Chamber of Commerce, CFA Institute,

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Section: The Effect Of Forecast Frequency On the Fercmentioning

confidence: 99%

Do management EPS forecasts allow returns to reflect future earnings? Implications for the continuation of management’s quarterly earnings guidance

et al. 2010

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“…Omitting these factors would overstate the statistical inference of IS. For example, larger firms may make more disclosures for fear of litigation risk (Kasznik and Lev 1995;Johnson, Kasznik and Nelson 2001).…”

Section: Controlling For Potentially Omitted Correlated Variablesmentioning

confidence: 99%

Does Income Smoothing Improve Earnings Informativeness?

Tucker

Zarowin

2005

SSRN Journal

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This paper uses a new approach to examine whether income smoothing garbles earnings information or improves the informativeness of past and current earnings about future earnings and cash flows. We measure income smoothing by the negative correlation of a firm's change in discretionary accruals with its change in pre-managed earnings. Using the approach of Collins, Kothari, Shanken and Sloan (1994), we find that change in the current stock price of higher-smoothing firms contains more information about their future earnings than does change in the stock price of lower-smoothing firms.This result is robust to decomposing earnings into cash flows and accruals and to controlling for firm size, growth, future earnings variability, private information search activities, and cross-sectional correlations.

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“…Specifically, it establishes a statutory safe harbor protecting firms from liability for voluntary disclosures of financial projections and other forward-looking information (see Johnson, Kasznik, and Nelson (2000) for additional discussion). In addition, the PSLRA institutes a heightened pleading standard that makes it more difficult for plaintiffs to allege securities fraud without specific evidence of wrong-doing.…”

Section: Key Provisionsmentioning

confidence: 99%

Shareholder Wealth Effects of the Private Securities Litigation Reform Act of 1995

Kasznik²,

2000

Self Cite

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Abstract. This paper investigates the reaction of stock prices to enactment of the Private Securities Litigation Reform Act of 1995 (PSLRA). Based on a sample of 489 high-technology firms, we find that the PSLRA was wealth-increasing, on average, and that the market reaction is more positive for firms at greatest risk of being sued in a securities class action. However, we also show that the PSLRA was less beneficial for firms likely to be the subject of a meritorious lawsuit. Collectively, our evidence implies that shareholders generally benefit from restrictions on private securities litigation, although these benefits are mitigated when other mechanisms for curbing fraudulent activity are inadequate.

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The Impact of Securities Litigation Reform on the Disclosure of Forward-Looking Information by High Technology Firms

Cited by 140 publications

References 20 publications

Do management EPS forecasts allow returns to reflect future earnings? Implications for the continuation of management’s quarterly earnings guidance

Do management EPS forecasts allow returns to reflect future earnings? Implications for the continuation of management’s quarterly earnings guidance

Does Income Smoothing Improve Earnings Informativeness?

Shareholder Wealth Effects of the Private Securities Litigation Reform Act of 1995

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