The Impact Of Management Good Or Bad News On The Behavior Of Analysts' Forecasts

In order to avoid adverse selection and reduce the agency costs, the management has the motivation for voluntary disclosure. Since the different information will bring different influence to the stock price, the managements' voluntary disclosure will show the different features when they faced the good or bad news.Our study finds that for the corporate with good news, the analyst forecasts are more accurate, the coverage is higher, and the analysts'diverge is narrower, compared with the one with bad news.As for the bad news group, the adjustment for forecast is greater than the good news group in the later periods. We think this phenomenon is an evidence for the hypothesis:Managers have strong incentives to avoid negative earnings surprises.