Abstract
In this study, we investigate whether the security market reaction to the announcement of lower than expected earnings (bad news earnings) is dependent on the fiscal quarter of the announcement (earlier quarters versus fourth quarter). Such dependence could arise from the provisions of generally accepted accounting principles which allow extensive use of managers' fiscal-year expectations when formulating interim cost estimates. These provisions provide managers with a potential means of delaying bad news earnings until the fourth-quarter earnings announcement. Support for the view that managers delay the release of bad news is provided by recent research on the timing of information releases (e.g., the release of bad earnings news, bad dividend news, and bad nonearnings news).' Since managers have the means (through generally accepted accounting principles for interim reporting) and the tendency (as suggested by the empirical evidence on the timing of information releases) to delay bad news, it seems plausible to hypothesize a larger security
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