The Fleeting Effects of Disclosure Forthcomingness on Management's Reporting Credibility
Author:
- 1 April 2005
- journal article
- Published by American Accounting Association in The Accounting Review
- Vol. 80 (2) , 723-744
Abstract
This study provides a theoretical framework and experimental evidence on how managers' disclosure decisions affect their credibility with investors. I find that in the short-term, more forthcoming disclosure has a positive effect on management's reporting credibility, especially when management is forthcoming about negative news. However, these short-term credibility effects do not persist over time. In the long-term, managers who report positive earnings news are rated as having higher reporting credibility than managers who report negative earnings news, regardless of their previous disclosure decisions.Keywords
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