Timeliness of Firms’ Voluntary Disclosure of Good and Bad News. Working Paper

Mixed views exist about whether firm managers voluntarily disclose good news more timely than they do bad news. Our study investigates this issue by inferring managers’ strategic disclosure behavior from the stock returns in four adjacent windows for a fiscal quarter, prior to and including the earnings announcement. We find that large firms disclose the same proportion of news in each examination window in good- and bad-news quarters; however, very bad news (i.e. severe negative returns) is more frequent during the quarter than after the quarter ends. In contrast, small firms disclose a larger proportion of news early in good- rather than bad-news quarters; however, very bad news is most frequent around earnings announcement. Our results suggest that the timeliness of firms ’ voluntary disclosure of good vs. bad news varies with firm size and the degree of news. Timeliness of Firms ’ Voluntary Disclosure of Good and Bad New