Journal of Accounting Research Vol. 47 No. 1 2009

Do Managers Withhold Bad News?

S. P. Kothari¹; Susan Shu^2,3; Peter D. Wysocki^4,5,1

¹ Massachusetts Institute of Technology · ² Boston College · ³ Conference Board · ⁴ Boston University · ⁵ Quest University Canada

Abstract

In this study, we examine whether managers delay disclosure of bad news relative to good news. If managers accumulate and withhold bad news up to a certain threshold, but leak and immediately reveal good news to investors, then we expect the magnitude of the negative stock price reaction to bad news disclosures to be greater than the magnitude of the positive stock price reaction to good news disclosures. We present evidence consistent with this prediction. Our analysis suggests that management, on average , delays the release of bad news to investors.

DOI

10.1111/j.1475-679x.2008.00318.x

Volume

47

Issue

1

Pages

241-276

Language

en

Sources

openalex bibtex:phds-export.bib crossref

Cite

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