1. Introduction Earnings press releases are “the major news event of the season for many companies as well as investors, analysts, financial media, and the market” ( Mahoney and Lewis 2004 ). The information content of earnings press releases has increased significantly over time ( Kross and Kim 2000 ; Lo and Lys 2001 ; Francis, Schipper, and Vincent 2002a, 2002b ; Landsman and Maydew 2002 ; Collins, Li, and Xie 2005 ) and has been accompanied by a corresponding increase in press release length. Specifically, the number of words used in earnings press releases increased approximately five times between 1980 and 1999 ( Francis et al. 2002b ). This trend continued over our sample period, with median earnings press release length increasing to more than 1,700 words by 2003, a greater than 90 percent increase from 1998. This dramatic increase in the sheer number of words used in earnings press releases suggests an important question: Does the language used throughout an earnings press release provide a signal regarding managers’ expectations about future performance? If so, does the market respond to this information? Earnings press releases are characterized as a disclosure mechanism revealing a “package of information” to
Contemporary Accounting Research – Wiley
Published: Sep 1, 2012
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