The Quiet Period Goes out with a Bang

Bradley, Daniel; Jordan, Bradford D.; Ritter, Jay R.

doi:10.1111/1540-6261.00517

Cited by 261 publications

(202 citation statements)

References 19 publications

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“…There is a difference here, though, in that the ''rumor'' is simply that there is an upcoming earnings announcement, not that the news will necessarily be better than expected. In this sense, our results are similar to those of Bradley et al (2003). They find that stocks recently taken public rise in price in advance of the ending of the quiet period, with the ''rumor'' being only that the lead banker's analyst will shortly be issuing a research report, not that the content of the report will be any more positive than expected.…”

Section: Discussionsupporting

confidence: 88%

Limited attention and the earnings announcement returns of past stock market winners

2009

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We document that stocks with the strongest prior 12-month returns experience a significant average market-adjusted return of 1.58% during the five trading days before their earnings announcements and a significant average marketadjusted return of -1.86% in the five trading days afterward. These returns remain significant even after accounting for transactions costs. We empirically test a limited attention explanation for these anomalous returns-that stocks with sharp run-ups tend to attract individual investors' attention and investment dollars, particularly before their earnings announcements. Our analysis suggests that the trading decisions of individual investors are at least partly responsible for the return pattern that we observe.

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Section: Discussionsupporting

confidence: 88%

Limited attention and the earnings announcement returns of past stock market winners

2009

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“…Table 10 (Panel I) tests this theory, asking if one of the disadvantages of the IPO was that it made the company suddenly open to public scrutiny. Only 25% of respondents agreed with this question, which does not support the theory of Bradley, Jordan, and Ritter (2003).…”

Section: Life Cycle Theory Resultsmentioning

confidence: 76%

“…This perception is consistent with Ritter and Welch (2002), who argue that media attention plays a minor role. Bradley, Jordan, and Ritter (2003) note that one disadvantage of the IPO is that IPO firms are monitored and evaluated by investors; therefore, the price of the stock starts to represent the company's market value, which becomes very vulnerable to the investor's perception of the company. The authors show that IPOs allow for the creation of an analyst following and that an overwhelming number of analyst opinions are highly favorable toward the IPO companies immediately following the end of the quiet period.…”

Section: Life Cycle Theory Resultsmentioning

confidence: 99%

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Abertura de capital no Brasil: percepções de executivos financeiros

Steffen

Zanini

2012

Rev. contab. finanç.

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This study examines financial executives' perceptions of Initial Public Offerings (IPOs) in Brazil, replicating in large part the research of Brau, Ryan, and DeGraw (2006) in the United States. We surveyed 32 chief financial executives of companies that conducted an IPO between 2004 and 2008 in Brazil and tested two financial theories: the Life Cycle Theory and the Market Timing Theory. The results show that the financial executives in Brazil confirm the life cycle theory as well as market timing and static trade-off theories. The financial executives do not consider an IPO to be a way to change company control, and they do not perceive the disadvantages of the loss of control and confidentiality that result from an IPO.

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“…As a result, analysts may enjoy greater opportunities for profitable investment recommendations and higher trading commissions when complexity is high. Past research finds that firm size, trading volume, profitability outlook, earnings smoothness, presentations to analysts, voluntary disclosures, and stock beta are positively related to the number of analysts covering a firm (Bhushan 1989;Lang and Lundholm 1993;Previts et al 1994;McNichols and O'Brien 1997;Francis and Soffer 1997;Healy and Wahlen 1999;Botosan and Harris 2000;Bradley et al 2003).…”

Section: Analyst Coveragementioning

confidence: 99%

The Effect of Accounting Reporting Complexity on Financial Analysts

Hoitash

Yezegel

2017

SSRN Journal

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We investigate the association between a new XBRL based measure of accounting reporting complexity (ARC) and analyst behavior. We find that analysts are less likely to cover firms with complex accounting. Further, higher ARC is associated with lower forecast accuracy, higher forecast dispersion, and lower informativeness of recommendation revisions and responsiveness to earnings announcements. This association is attenuated when analysts have longer tenure, greater firm-specific experience, and are focused on fewer industries. Investigating several complex accounts, we find that the complexity of derivatives, fair value, and pension accounts are each negatively associated with forecast accuracy, suggesting that understanding these complex accounts requires specialization. We propose a new measure of analysts' account-specific expertise and find that expertise with derivative and fair value accounts attenuates the negative effects of complexity in these accounts to a greater extent than general analyst experience. Overall, our findings suggest that analysts' expertise plays an important role in mitigating the adverse effects of ARC. JEL Classification: G24, G29, M41Keywords: XBRL, accounting complexity, financial analysts' performance, financial analysts' expertise Data Availability: Data are publicly available from sources identified in the paper. 1 The Effect of Accounting Reporting Complexity on Financial Analysts I. IntroductionRegulators and standard setters have long recognized that financial reporting has become overly complicated (SEC 2008; FRC 2009). As a result, the Securities and Exchange Commission (SEC) and the Financial Accounting Standards Board (FASB) undertook several initiatives to understand and simplify the financial reports (e.g. SEC 2008; FASB 2016). In this study, we examine how accounting reporting complexity (hereafter, ARC), measured as the count of accounting items disclosed in eXtensible Business Reporting Language (XBRL) 10-K filings, is associated with financial analysts' performance and coverage decisions. Since each accounting item is based on authoritative standards and regulations, understanding the financial reports of firms with higher ARC necessitates broader and more in-depth knowledge of accounting.While Hoitash and Hoitash (2017) find that more accounting disclosure complicates the work of preparers and auditors, it is unclear how disclosure volume will be associated with the work of sophisticated market participants such as financial analysts. Greater volume of accounting disclosures can help analysts understand past performance and generate more accurate forecasts.Indeed, several studies find that more disaggregated disclosures can lead to better analyst performance (Lang and Lundholm 1996;Chen et al. 2015). In contrast, more disclosure requires greater knowledge of accounting rules and regulations on part of financial analysts and a need to collect, analyze, and incorporate more information into their predictions. As a result, ARC may hurt overall analyst perfor...

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The Quiet Period Goes out with a Bang

Abstract: We examine the expiration of the IPO quiet period, which occurs after the 25th calendar day following the offering.

Cited by 261 publications

References 19 publications

Limited attention and the earnings announcement returns of past stock market winners

Limited attention and the earnings announcement returns of past stock market winners

Abertura de capital no Brasil: percepções de executivos financeiros

The Effect of Accounting Reporting Complexity on Financial Analysts

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