دانلود رایگان مقاله لاتین تغییر لحن اعلام سود و فروش درون سازمانی از سایت الزویر
عنوان فارسی مقاله:
تغییرات لحن اعلام سود و فروش درون سازمانی
عنوان انگلیسی مقاله:
Changes in earnings announcement tone and insider sales
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مقدمه انگلیسی مقاله:
1. Introduction
The prior literature finds that insider trading is related to financial reporting and disclosure. Specifically, insider trading is associated with reporting a loss (Aier, 2013), a break in an earnings growth string (Ke, Huddart, & Petroni, 2003), just meeting or beating analysts' forecasts (Cheng & Warfield, 2005), good news in a 10 K or 10Q filing (Huddart, Ke, & Shi, 2007), and favorable management forecasts (Noe, 1999). Cheng and Lo (2006) find that increased insider trading is associated with an increase in management forecasts, and Rogers (2008) notes that managers increase disclosure quality before selling equity. Thus, while insider trading is associated with disclosure quality and with the numerical results reported in earnings announcements, it is unclear whether insider trading is related to specific attributes of the narrative portion of earnings announcements. Thus, I contribute to the literature by investigating whether CEO equity sales are associated with changes in the optimistic tone of earnings announcements. The change in (or unexpected) optimistic tone of earnings announcements is associated with abnormal returns around the announcement date, which indicates the market (at least partially) prices disclosure tone (Davis, Piger, & Sedor, 2012; Demers & Vega, 2011; Henry, 2008; Henry & Leone, 2010; Huang, Teoh, & Zhang, 2014).2 Demers and Vega (2011) and Feldman, Govinharaj, Livnat, and Segal (2010) find that disclosure tone is also related to longerwindow (i.e., one quarter) abnormal returns, which suggests that tone is impounded into price over time. Thus, the literature indicates that the tone of earnings announcements provides information to market participants and that this information is impounded into stock price. In this way, an unexpected increase in optimistic tone (e.g., lauding firm performance) increases stock price, which increases the proceeds from any subsequent equity sales. Therefore, I hypothesize a positive association between changes in optimistic tone in earnings announcements and CEOs' subsequent equity sales. I focus on insider sales (and not insider purchases) because the clear economic incentives to sell equity after more-optimistic earnings announcements provide a more powerful setting to test the relationship between earning announcement tone and CEO equity sales. There are two alternative explanations for a positive association between changes in optimistic tone of earnings announcements and CEO equity sales. First, CEOs could increase optimistic tone to communicate positive information about their firms to market participants. CEOs could then decide to sell equity after observing a stock price increase. In other words, CEOs could decide to sell equity after a legitimately optimistic earnings announcement. This explanation is consistent with the literature that finds that CEOs benefit from timing sales after positive disclosures (e.g., Noe, 1999). Second, CEOs could have decided (or pre-contracted) before the earnings announcement to sell equity after the earnings announcement. With knowledge of a forthcoming sale, CEOs could increase the optimistic tone of their earnings announcement in an effort to increase the proceeds from their sale. Under this alternative, the increase in optimistic tone may not correspond to expectations of future firm performance, and the CEO could be trying to mislead the market, at least temporarily. This explanation is consistent with Huang et al. (2014), who find that increased optimistic tone is negatively associated with future earnings and cash flows. The timing of the decision to sell equity is unobservable. As a result, I am unable to distinguish between the two alternative explanations. It is possible that both alternatives have validity. Therefore, I focus my hypotheses and interpretations on the association, rather than on causation, between changes in optimistic tone and subsequent equity sales.3 I expect two factors to mitigate the positive association between changes in optimistic tone and CEO equity sales. First, the Sarbanes– Oxley Act of 2002 (SOX) was intended to improve the overall transparency and reliability of financial reporting, including insider trading. For example, Brochet (2010) finds less information-based insider trading after SOX. Therefore, I hypothesize that a positive association between changes in earnings announcement optimistic tone and CEO equity sales is weaker after the passage of SOX. Second, Rogers, Van Buskirk, and Zechman (2011) find that unusually optimistic earnings announcements are positively related to shareholder class action lawsuits. To reduce litigation risk, firms could write less-optimistic earnings announcements or sell less equity after the optimistic announcement. Therefore, I hypothesize that the positive relationship between changes in optimistic tone and CEO equity sales is weaker for firms that face a higher litigation risk. I conduct my tests using approximately 20,000 firm-quarter observations from 1998 to 2007. The results support the hypotheses. Specifically, I find a positive association between changes in the optimistic tone of earnings announcements and CEOs' subsequent equity sales and that both SOX and litigation risk mitigate this relation. I compute the direct financial gain to CEOs from selling equity after a moreoptimistic earnings announcement and find that it is small relative to their total compensation. My paper makes several contributions to the literature. First, I contribute to the insider trading literature by showing that insider sales are related to changes in optimistic tone of earnings announcements. This complements prior literature that finds that insider trading is associated with the numerical results in the earnings announcement (Aier, 2013; Cheng & Warfield, 2005; Ke et al., 2003) and overall disclosure quality (Rogers, 2008). Second, I contribute to the narrative disclosure and textual analysis literature by examining how changes in earnings announcement tone relate to the real economic activities of firm managers. Specifically, I document that changes in optimistic tone are related to individual managers' specific transactions (e.g., CEO sales) in addition to firm performance (Davis et al., 2012) and firm-level transactions, such as mergers and acquisitions and seasoned equity offerings (Huang et al., 2014).
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کلمات کلیدی:
PDF]Disclosure Tone of the Spin-off Prospectus and Insider Trading joshuaspizman.com/wp-content/uploads/2015/11/choi.pdf by W Choi - 2015 - Related articles (MD&A) in a spin-off prospectus is negatively associated with insider trading pattern in ..... changes in the optimistic tone of earnings announcements and CEOs' ... Disclosure tone and shareholder litigation - SSRN https://papers.ssrn.com/sol3/Delivery.cfm?abstractid=1331608 by JL Rogers - 2011 - Cited by 170 - Related articles statements in their lawsuits and that sued firms' earnings announcements are unusually ... litigation, disclosure, tone, earnings announcements, insider trading. Welcome to Professor Roulstone's Research Homepage https://fisher.osu.edu/~roulstone.1/ Insider Trading and the Information Content of Earnings Announcements ... to earnings announcements and the “surprise” in the tone of forward-looking ... Disclosure Tone and Shareholder Litigation - jstor https://www.jstor.org/stable/41408050 optimistic statements are not contradicted by insider selling. Finally ... Keywords: securities litigation; disclosure; tone; earnings announcements; insider trading.
