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Asymmetric Timeliness and Delayed Recognition of Bad News
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- Authors
- Issue Date
- 2011
- Citation
- Korean Journal of Policy Studies, Vol.26 No.1, pp. 189-211
- Keywords
- asymmetric timeliness ; conservatism ; earning prediction
- Abstract
- This article examines whether the asymmetric timeliness measure captures delayed recognition of bad news and in which manner this delayed recognition occurs. I find that negative earnings changes of firms with high
asymmetric timeliness have significant predictive power for future earnings changes of low-asymmetric-timeliness firms in the same industry. In contrast, the negative earnings changes of firms with low asymmetric timeliness do not have predictive power for future earnings changes of high-asymmetric-timeliness firms in the same industry. Moreover, neither type of firm has predictive power for the other group when earnings changes are positive. This result suggests that high-asymmetric-timeliness firms recognize the effects of a common negative shock before low-asymmetric-timeliness firms. Further, low-asymmetric-timeliness firms have more frequent and smaller negative earnings changes, suggesting
that the eventual recognition of negative news trickles out as opposed to being
recognized in an earnings bath.
- ISSN
- 1225-5017
- Language
- English
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