The party's over / Nicholas Seybert in Management science, Vol. 58 N° 2 (Février 2012)  

Public ISBD [article]  inManagement science > Vol. 58 N° 2 (Février 2012) . - pp. 308-319 Titre : The party's over : The role of earnings guidance in resolving sentiment-driven overvaluation Type de document : texte imprimé Auteurs : Nicholas Seybert, Auteur ; Holly I. Yang, Auteur Année de publication : 2012 Article en page(s) : pp. 308-319 Note générale : Management Langues : Anglais (eng) Mots-clés : Finance Asset pricing Management Earnings guidance Investor sentiment Market efficiency Résumé : This paper shows that an important link between investor sentiment and firm overvaluation is optimistic earnings expectations, and that management earnings guidance helps resolve sentiment-driven overvaluation. Using previously identified firm characteristics, we find that most of the negative returns to uncertain firms in months following high-sentiment periods fall within the three-day window around the issuance of management earnings guidance. Comparisons of guidance months to nonguidance months show that guidance issuance affects the magnitude and not just the daily distribution of negative returns. There is also some evidence of negative returns around earnings announcements for firms that previously issued guidance, suggesting that guidance does not entirely correct optimistic earnings expectations. To provide additional insight into the strength of the guidance effect, we show that the market reacts more strongly to surprises, particularly negative surprises, following high-sentiment periods. Finally, firms with higher transient institutional ownership are less likely to guide, and their guidance is less likely to contain bad news following high-sentiment periods, indicating that managers with a short-term focus are hesitant to correct optimistic market expectations. DEWEY : 658 ISSN : 0025-1909 En ligne : http://mansci.journal.informs.org/content/58/2/308.abstract [article] The party's over : The role of earnings guidance in resolving sentiment-driven overvaluation [texte imprimé] / Nicholas Seybert, Auteur ; Holly I. Yang, Auteur . - 2012 . - pp. 308-319. Management Langues : Anglais (eng) in Management science > Vol. 58 N° 2 (Février 2012) . - pp. 308-319 Mots-clés : Finance Asset pricing Management Earnings guidance Investor sentiment Market efficiency Résumé : This paper shows that an important link between investor sentiment and firm overvaluation is optimistic earnings expectations, and that management earnings guidance helps resolve sentiment-driven overvaluation. Using previously identified firm characteristics, we find that most of the negative returns to uncertain firms in months following high-sentiment periods fall within the three-day window around the issuance of management earnings guidance. Comparisons of guidance months to nonguidance months show that guidance issuance affects the magnitude and not just the daily distribution of negative returns. There is also some evidence of negative returns around earnings announcements for firms that previously issued guidance, suggesting that guidance does not entirely correct optimistic earnings expectations. To provide additional insight into the strength of the guidance effect, we show that the market reacts more strongly to surprises, particularly negative surprises, following high-sentiment periods. Finally, firms with higher transient institutional ownership are less likely to guide, and their guidance is less likely to contain bad news following high-sentiment periods, indicating that managers with a short-term focus are hesitant to correct optimistic market expectations. DEWEY : 658 ISSN : 0025-1909 En ligne : http://mansci.journal.informs.org/content/58/2/308.abstract

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