TY - JOUR
T1 - The effect of regulation fair disclosure on conference calls
T2 - The case of earnings surprises
AU - Baik, Bok
AU - Nam, Hye Jeong
PY - 2009/12
Y1 - 2009/12
N2 - While conference calls have been widely used as a communication tool between firms and investors, little research has examined the effect of this voluntary disclosure metric on analyst forecasts. In this paper, we examine whether firms use conference calls to guide down analysts' earnings forecasts, thereby avoiding negative earnings surprises before and after Regulation FD. Our findings show that firms hosting conference calls are more likely to guide analysts' forecasts downward and, as a result, they tend to successfully avoid negative earnings surprises in the pre Reg FD period. However, we do not find such relations in the post Reg FD period. We also find that the market reacts positively to firms hosting conference calls only in the post Reg FD period, consistent with the view that the market rewards a reduction in managers' opportunistic guidance to meet the analysts' earnings estimate.
AB - While conference calls have been widely used as a communication tool between firms and investors, little research has examined the effect of this voluntary disclosure metric on analyst forecasts. In this paper, we examine whether firms use conference calls to guide down analysts' earnings forecasts, thereby avoiding negative earnings surprises before and after Regulation FD. Our findings show that firms hosting conference calls are more likely to guide analysts' forecasts downward and, as a result, they tend to successfully avoid negative earnings surprises in the pre Reg FD period. However, we do not find such relations in the post Reg FD period. We also find that the market reacts positively to firms hosting conference calls only in the post Reg FD period, consistent with the view that the market rewards a reduction in managers' opportunistic guidance to meet the analysts' earnings estimate.
KW - Conference call
KW - Earnings surprises
KW - Forecast revision
KW - Regulation FD
KW - Voluntary disclosure
UR - http://www.scopus.com/inward/record.url?scp=77955402492&partnerID=8YFLogxK
U2 - 10.1111/j.2041-6156.2009.tb00031.x
DO - 10.1111/j.2041-6156.2009.tb00031.x
M3 - Article
AN - SCOPUS:77955402492
SN - 2041-9945
VL - 38
SP - 801
EP - 829
JO - Asia-Pacific Journal of Financial Studies
JF - Asia-Pacific Journal of Financial Studies
IS - 6
ER -