The Timeliness of Bad Earnings News and Litigation Risk
This study investigates whether the timely revelation of bad earnings news is associated with a lower incidence of litigation. The timeliness of earnings news is captured by a new measure based on the evolution of the consensus analyst earnings forecast. Holding total bad earnings news and other det...
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Published in | The Accounting review Vol. 87; no. 6; pp. 1967 - 1991 |
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Main Authors | , , , |
Format | Journal Article |
Language | English |
Published |
Sarasota
American Accounting Association
01.11.2012
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Subjects | |
Online Access | Get full text |
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Summary: | This study investigates whether the timely revelation of bad earnings news is associated with a lower incidence of litigation. The timeliness of earnings news is captured by a new measure based on the evolution of the consensus analyst earnings forecast. Holding total bad earnings news and other determinants of litigation constant, we find that earlier revelation of bad earnings news lowers the likelihood of litigation. This result holds for both settled and dismissed lawsuits. Further, we reconcile our findings with prior work that measures timeliness using managerial warnings via press releases. These tests suggest our findings are attributable to the ability of our timeliness measure to capture bad earning news revealed through disclosure channels beyond press releases. |
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Bibliography: | ObjectType-Article-2 SourceType-Scholarly Journals-1 ObjectType-Feature-1 content type line 23 |
ISSN: | 0001-4826 1558-7967 |
DOI: | 10.2308/accr-50221 |