ADDITIONAL EVIDENCE ON THE INFORMATION-CONTENT OF MANAGEMENT EARNINGS FORECASTS

Prior studies have documented that management earnings forecasts which exceed expected earnings ("good news" forecasts) are associated with significant positive abnormal stock returns, on average, when publicly released. However, no significant negative abnormal returns are observed immediately surrounding the release of management forecasts which are defined as bad news.' These findings conflict with the results to date on price reactions associated with earnings announcements. For example, Ball and Brown [1968] found that good news (bad news) annual earnings announcements are associated with positive (negative) abnormal returns in the months preceding and including the annual earnings announcement. Foster [1977] reported similar findings for quarterly earnings announcements. Beaver, Clarke, and Wright [1979] found a positive ordinal association between the magnitude of "unexpected" earnings (the difference between actual earnings and expected earnings)