Street Earnings Activation Delay

Street earnings are non-GAAP earnings, adjusted for consistency with the analyst majority basis and disseminated by forecast data providers (FDPs). We find that the time it takes an FDP to incorporate street earnings in its products (activation delay, hereafter) reflects variation in the difficulty of constructing street earnings, investor demand for timely street earnings, and FDPs' limited attention and resources. Furthermore, the market reaction to reported earnings is more timely when activation delay is shorter, and price discovery is highly concentrated during the hour after street earnings are activated. Finally, activation delay increases the delay with which street earnings are incorporated in analyst forecasts. We conclude that frictions in information processing prevent market participants from instantaneously constructing and incorporating street earnings in their decisions, and that FDPs play a key role in alleviating these frictions

‘Mere Puffery’ or Credible Disclosure? The Real Effects of Adopting Voluntary ESG Disclosure Standards

In this paper, we examine factors prompting companies to voluntarily adopt sustainability standards for sustainability reporting and the consequences of such voluntary commitment. Using data on firms’ voluntary adoption of sustainability standards developed by the Sustainability Accounting Standards Board (SASB), we find that peer pressure, sustainability-focused institutional ownership, firm visibility and performance are among the main determinants of SASB standards adoption. In terms of consequences of standards adoption, we find improvements in various sustainability outcomes including fewer work-related injuries, lower toxic releases, fewer negative sustainability-related incidents, and higher sustainability ratings. Overall, these results inform our understanding of the conditions under which voluntary disclosure standards are likely to be adopted by firms and the potential real effects of such voluntary adoptio

Macroeconomic Uncertainty and Quantitative versus Qualitative Inputs to Analyst Risk Forecasts

Risk forecasting is crucial for informed investment decision-making. Moreover, the salience of investment risk increases during economically uncertain times. In this paper, we study how sell-side analysts form expectations of firm risk, under different macroeconomic conditions (low versus high uncertainty) and by distinguishing between quantitative and qualitative information inputs. We find that analysts jointly consider quantitative and qualitative information but that their reliance on qualitative information - in particular, disclosure tone - increases when macroeconomic uncertainty is high. We also find that analysts mostly rely on disclosure tone when it contradicts quantitative information. These findings highlight how narrative disclosures can provide context for quantitative information. Finally, we find that analysts' specific use of quantitative/qualitative information improves their forecasts as predictors of firm risk. Together, our results illuminate analysts' risk forecasting process - what information they use and ho

Management Disclosures of Going Concern Uncertainties: The Case of Initial Public Offerings

ABSTRACT We study the information content and determinants associated with voluntary management disclosures of going concern (GC) uncertainties by IPO issuers. In terms of information content, we examine IPO price revision and initial return and find robust support that management GC disclosures are associated with downward revisions in the IPO offer price and, upon considering the mediating effects of the price revision, also associated with lower initial returns. In terms of determinants, and after controlling for other factors (e.g., issuer distress, start-up status, size, cash burn), we find that the presence of a management GC disclosure is negatively associated with a proxy for issuer financial incentives to withhold “bad news” and positively associated with the extent of risk factors disclosure. Overall, our results provide support for the information content of voluntary management disclosures of GC uncertainties by IPO issuers, the presence of which is associated with agency and risk motivations. JEL Classifications: G24; G32; M13; M41