Get 20M+ Full-Text Papers For Less Than $1.50/day. Start a 14-Day Trial for You or Your Team.

Learn More →

Investor Sentiment and Corporate Disclosure

Investor Sentiment and Corporate Disclosure ABSTRACT This paper investigates how firms react strategically to investor sentiment via their disclosure policies in an attempt to influence the sentiment‐induced biases in expectations. Proxying for sentiment using the Michigan Consumer Confidence Index, we show that during low‐sentiment periods, managers increase forecasts to “walk up” current estimates of future earnings over long horizons. In contrast, during periods of high sentiment, managers reduce their long‐horizon forecasting activity. Further, while there is an association between sentiment and the biases in analysts' estimates of future earnings, management disclosures vary with sentiment even after controlling for analyst pessimism, indicating that managers attempt to communicate with investors at large, and not just analysts. Our study provides evidence that firms' long‐horizon disclosure choices reflect managers' desire to maintain optimistic earnings valuations. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Accounting Research Wiley

Investor Sentiment and Corporate Disclosure

Loading next page...
 
/lp/wiley/investor-sentiment-and-corporate-disclosure-wzuJ8bqV6h

References (27)

Publisher
Wiley
Copyright
©, University of Chicago on behalf of the Institute of Professional Accounting, 2008
ISSN
0021-8456
eISSN
1475-679X
DOI
10.1111/j.1475-679X.2008.00305.x
Publisher site
See Article on Publisher Site

Abstract

ABSTRACT This paper investigates how firms react strategically to investor sentiment via their disclosure policies in an attempt to influence the sentiment‐induced biases in expectations. Proxying for sentiment using the Michigan Consumer Confidence Index, we show that during low‐sentiment periods, managers increase forecasts to “walk up” current estimates of future earnings over long horizons. In contrast, during periods of high sentiment, managers reduce their long‐horizon forecasting activity. Further, while there is an association between sentiment and the biases in analysts' estimates of future earnings, management disclosures vary with sentiment even after controlling for analyst pessimism, indicating that managers attempt to communicate with investors at large, and not just analysts. Our study provides evidence that firms' long‐horizon disclosure choices reflect managers' desire to maintain optimistic earnings valuations.

Journal

Journal of Accounting ResearchWiley

Published: Dec 1, 2008

There are no references for this article.