Bad News Announcements Research Articles

A Cross-Cultural Multi-Country Analysis of Unfavorable News Announcements in Public Companies

Value-relevant bad news leads to declining stockholder wealth. Various factors moderate the decline. We explore the moderating effect of culture (country), economic development levels, and insider trading laws. To this effect, we compile rich bad news announcement data from the US, Japan, China, and India. Ours is the first such study to cover comprehensive data from multiple countries.
 Stock markets in the US, Japan, and India experience a significant stock decline following the public announcement of bad news. In contrast, companies traded in the Chinese stock market experienced a positive stock impact. Companies in countries with high long-term orientation (Japan and China) perform better than those with low long-term orientation (the US and India). Economic development levels also play a significant mediating role. Countries with stronger trading laws do not experience stock decline before the public announcement of disruptions. Our study enriches the current state of the art by performing a multi-country analysis of stock impact from bad news announcements. The results are of interest to investors and policymakers.

LA CONSULTATION DANNONCE DE CANCER ENTRE REALITES ET PERSPECTIVES

The announcement of the diagnosis of cancer represents a fundamentalstep in the patientshistory, it conditions the quality of the bond of trust with the doctor and requiresveryspecial attention. It is for thisreasonthat the announcement consultation must beidentified in the course of care for cancer patients. The objective of oursurvey of 80 patients followed in the radiotherapydepartment at the National Institute of Oncologyis to analyze the methods of announcing cancer and the feelings of patients in order to target possible points for improvement for a better care whileaddressingsomepsychological and communicationalcharacteristics of the announcement of bad news, ethicalconsiderations and regulatory and deontologicalframeworksthat structure thisapproach in Morocco.

Common institutional blockholders and tail risk

We find that the tail risk of a firm's stock returns is positively affected by the tail risk of other firms held by the same common institutional blockholder (CIB). The CIB peer effect on tail risk increases (decreases) after exogenous initiations (terminations) of peer connections via CIB ownership, consistent with a causal interpretation. Our findings support the disclosure herding hypothesis, which predicts that firms release bad news after other firms’ bad news announcements. In addition, commonality in the real investment decisions of a firm and its CIB peers, along with the common trading pressure of these firms, contribute to the positive relationship between firms’ tail risk, highlighting the multifaceted roles of institutional investors in the contagion of firms’ tail risk. Finally, the CIB peer effect on tail risk is stronger when the CEO is more risk averse, CIBs hold more shares, or CIBs are pressure-sensitive (i.e., banks and insurance companies).

Culture and Stock Market Impact From Bad News Announcements

Bad news causes a decline in the stockholder’s wealth. However, the magnitude of the impact varies between studies. Intending to explain the different impacts observed, we explore the factors affecting the extent of stock impact from bad news announcement. Event Study Methodology is used to analyze data from the US, India, and Japan. The rich multinational data allows the comparison of stock impact between countries. We find that disruptions cause stock decline; however, the magnitude of reduction varies between countries. We argue that national culture plays a vital role in planning and management strategies, affecting mitigation and continuity strategies. Modern companies are multinational and operate in multiple countries. Despite this, national culture is ingrained in their management styles. To explore this, we also study companies traded on stock markets outside their domicile country. We find that national culture has a strong influence on planning and preparedness. Cultural orientation impacts resiliency. We argue that investors realize the importance of culture as company domicile affects the stock impact from bad news.

Attitudes of the General Population Regarding Patient Information for a Chronic and Life-Threatening Disease: A Cross-Sectional Study.

The form of communication developed between the physician and the patient and between the physician and the patient's close relatives builds the foundation for the process of announcing unpleasant news, which is related to the diagnosis of chronic disease. The aim of this study was to investigate the attitudes of the general population regarding the information of patients for a chronic and life-threatening disease. It is a cross-sectional study. An anonymous questionnaire was used on a sample of 350 people. The 95.1% of participants considered that patients have the right to be fully informed about their health status and that the physician has the right to be informed. The 90.3% of the respondents argued that patients differ in their preferences. Totally, 60.3% of participants agreed that all patients would like to know the bad news about their health, while 44.5% argued that patients do not want to hear bad news about their health, and 32.3% believed that patients should be protected from the announcement of bad news. The majority of respondents (95.6%) were informed by the physician about their or their relevant chronic disease. The general population is of the opinion that patients should be informed about their health status. Due to the fact that each patient responds differently to the announcement of the unpleasant news, the respondents replied that the announcement of the unpleasant news should be personalized and carried out by the physician.

Envy, Jealousy and Insider Trading: The Case of Martha Stewart

Envy, Jealousy and Insider Trading: The Case of Martha Stewart

Value-Relevance of Good-News Versus Bad-News Management Earnings Forecasts

We posit that the market views bad-news management earnings forecasts as more credible and value-relevant than good-news forecasts not because good-news forecasts tend to be biased, but rather because they are far noisier than bad-news forecasts. After controlling for noise, the difference in market response to good and bad news disappears. We demonstrate that bad-news forecasts show much lower dispersion around final earnings and, unlike good-news forecasts, they become considerably more accurate over time. These results provide direct support for the hypothesis that management perceives incentives to verify information when the news is bad as well as to delay bad-news announcements to allow time to gather additional information. These findings provide a rational explanation, not based on bias, for why on average the market’s reaction to good-news management earnings forecasts is weaker than to bad-news forecasts.

Le vécu par le pédiatre de l’annonce d’une « mauvaise nouvelle » à l’enfant et à l’adolescent

Few studies are available on pediatricians’ experience with announcing bad news. Announcing bad news is an important component of medical practice and is even more complex in pediatrics because parents must be associated. We had 20 hospital pediatricians complete a questionnaire containing 30 questions about their own experience announcing bad news to a child or a teenager. In spite of their experience and the time they have spent practicing medicine, there are many limitations stemming from different factors concerning children, teenagers, their families, and themselves. The difficulties encountered by pediatricians are mainly related to the timing of the announcement, the location, the choice of the words used, and the poor understanding of children and families, due to intellectual, cultural, or psychological limitations. Pediatricians question their own capacity to make such an announcement, wondering if the information has actually been well understood. They indicate that they are themselves affected. Most of them develop and implement strategies to refute the emotional instability caused by the announcement of bad news. Yet many of them feel weak, even talking about a deep sense of loneliness and guilt.

The More We Know About Fundamentals, the Less We Agree on Price: Evidence from Earnings Announcements

Can an earnings announcement decrease disagreement about fundamentals while simultaneously increasing disagreement about price? Kondor (2012) develops a rational expectations model in which the presence of short-horizon investors can lead to a polarization of higher-order beliefs about price (i.e., beliefs regarding the opinions of other investors), even as a public announcement reduces disagreement about fundamentals. Using analyst forecast dispersion and implied volatility to proxy for differences of opinion about fundamentals and price, respectively, I find a positive association between the presence of speculative traders and both the likelihood and extent of divergence between changes in price and earnings disagreement around earnings announcements characterized by decreasing forecast dispersion. Further, I document that the association is stronger following good news announcements than following bad news announcements consistent with more precise public signals triggering higher-order disagreement. Finally, using abnormal announcement period volume to measure disagreement about price, I continue to document a positive association between speculation and the extent of divergence. Taken together, these findings suggest that higher-order beliefs play an important role in assessing the informativeness of earnings announcements.

P225 Integrating Palliative Care into the Health Care Practice: What Facilitators and Barriers in Cameroon?

Recent evidence suggests that nursing students face barriers in translating into practice their acquired knowledge during a palliative care (PC) course. However, it is not known whether qualified health care workers exposed to this course experience the same barriers. This study aimed at reporting facilitators and barriers encountered in implementing a PC program in sub-Saharan Africa. This is a longitudinal study on an experimental single group of senior nurses and medical doctors enrolled into a pilot regional PC program, with an intensive 3-day PC initiator’s course, and dedicated to constitute a mobile PC unit equipped with PC tools and oral liquid morphine in 18 hospitals. Quantitative and qualitative data were collected through two focus groups discussion of 21 participants each, 10 individual critical incident interviews and observation to evaluate challenges faced in putting into practice PC knowledge. Qualified health care workers exposed to this program were able to translate knowledge into practice in their local settings. They were able to better understand and manage PC patients in their daily practice. However they reported difficulties in providing quality care: eligibility criteria, announcement of bad news, morphine management. Problems were also observed in the organization of service like difficulties in filling patients’ file, lack of reporting, and implication into other overwhelming hospital activities, with some of these said to originate from the hospital administration. This study suggests that qualified health care workers exposed to PC course can capitalize on it for use in their practice for patients in need. However the various barriers reported and observed are mostly inherent in the complexity of PC provision for holistic care, and the involvement of the hospital administrative authorities for quality service. It suggests the need for capacity building training for workers and a strong advocacy intended for any end-decision maker while implementing a PC program.

Investors' Misreaction to Subsequent Bad News

Authors : Liang-Chien Lee, Chih-Hsiang Chang, Ying-Shu Tseng Abstract : Comparing with prior studies mainly focused on the effect of a certain event (it may be the initial announcement of bad news or the repeated announcements of identical bad news) on stock price, the aim of this study is to explore how investors react to subsequent bad news with identical content. Empirical results show that as a result of behavioral pitfalls, investors underreact to the initial announcement of the bad news (i.e., unknown bad news) and overreact to the repeated announcements of the identical bad news (i.e., known bad news).

The Effects of Conservative Reporting on Investor Disagreement

We examine whether the level of a firm's conditional conservatism affects investor disagreement around earnings announcement dates. Investor disagreement is relevant for its repercussions on stock market efficiency. However, the literature related to the effect of firms’ reporting policies on disagreement is scant. Prior research suggests that conservatism, by requiring higher verifiability of profits, constrains earnings overstatements and encourages more complete revelations of losses, thus improving the information environment. In this paper, we further hypothesize that these effects of conservatism enhance news credibility and decrease information asymmetry, particularly for bad news announcements. This results in a lower disagreement and improved interpretation of earnings news. We consistently find that conservatism measures are negatively associated with proxies of announcement-time investor disagreement and that this effect is stronger when the firm is reporting bad news. Additional analyses indicate that the impact of conservatism is stronger when market surprise to the announcement is greater, while it is weaker in the presence of frequent and precise voluntary disclosure that preempts the earnings announcement. Finally, we show that a higher percentage of institutional investors’ ownership and a higher level of commitment to conservatism reinforce the impact of the latter.

Time-varying momentum return in Indian stock market

This study examines volatility persistence and time-varying volatility behaviour in momentum, winners' and losers' portfolio returns in the Indian stock market. The study reveals that the volatility persistence is more prominent with the losers' portfolio returns compared with the winners' portfolio returns as the volatility half-life for the losers is relatively higher than the winners. Furthermore, the asymmetric time-varying volatility model better explains the momentum returns over and above the symmetric time-varying volatility models. The study concludes that the announcement of bad news has noticeable negative effect on the losers' portfolio returns compared with the winners' portfolio returns.

The more we know about fundamentals the less we agree on price? Evidence from earnings announcements.

Can an earnings announcement decrease disagreement about fundamentals while simultaneously increasing disagreement about price? Kondor (2012) develops a rational expectations model in which the presence of short-horizon investors can lead to a polarization of higher-order beliefs about price (i.e., beliefs regarding the opinions of other investors), even as a public announcement reduces disagreement about fundamentals. Using analyst forecast dispersion and implied volatility to proxy for differences of opinion about fundamentals and price, respectively, I find a positive association between the presence of speculative traders and both the likelihood and extent of divergence between changes in price and earnings disagreement around earnings announcements characterized by decreasing forecast dispersion. Further, I document that the association is stronger following good news announcements than following bad news announcements consistent with more precise public signals triggering higher-order disagreement. Finally, using abnormal announcement period volume to measure disagreement about price, I continue to document a positive association between speculation and the extent of divergence. Taken together, these findings suggest that higher-order beliefs play an important role in assessing the informativeness of earnings announcements.

Conservative Reporting and Investors’ Divergence of Opinion

We examine whether the level of a firm’s conditional conservatism affects investor disagreement around earnings announcement dates. Investor disagreement is relevant for its repercussions on stock market efficiency. However, the literature related to the effect of firms’ reporting policies on disagreement is scant. Prior research suggests that conservatism, by requiring higher verifiability of profits, constrains earnings overstatements and encourages more complete revelations of losses, thus improving the information environment. In this paper, we further hypothesize that these effects of conservatism enhance news credibility and decrease information asymmetry, particularly for bad news announcements. This results in a lower disagreement and improved interpretation of earnings news. We consistently find that conservatism measures are negatively associated with proxies of announcement-time investor disagreement and that this effect is stronger when the firm is reporting bad news. Additional analyses indicate that the impact of conservatism is stronger when market surprise to the announcement is greater, while it is weaker in the presence of frequent and precise voluntary disclosure that preempts the earnings announcement. Finally, we show that a higher percentage of institutional investors’ ownership and a higher level of commitment to conservatism reinforce the impact of the latter.

The options market response to accounting earnings announcements

We examine the reaction of the equity options market to accounting earnings announcements over the period 1996–2008 using changes in implied volatility to measure the options market response to earnings news. We find that positive earnings surprises and positive profit announcements produce a larger uncertainty resolution than negative earnings surprises and loss announcements. We demonstrate an inverse relation between the change in implied volatility and earnings news in a three-day window immediately after an earnings announcement. We refer to the magnitude of this relation as the ‘options market earnings response coefficient’. This ‘options market earnings response coefficient’ is stronger for both bad news announcements and positive profit announcements. We do not find any significant relation between changes in implied volatility and earnings news in the pre- or post-announcement periods. We conclude that the options market efficiently absorbs earnings information.

Earnings Performance And Interim Reporting

This study documents that interim period earnings performance is relatively favorable to year-end earnings performance. Earnings performance is measured as the difference between reported earnings and the Value Line forecast. Additional analysis indicates the observed difference is due to a positive interim earnings performance bias not any particular negative year-end earnings performance bias. Interim earnings are found to be overstated on average about five cents per interim quarter. Previous studies have argued that since only year-end earrings are audited, they include adjustments for misstatements of previously reported interim earnings (as a result of errors, poor estimates, misallocations, etc.). The results here support the notion that management may have incentive to overstate interim (unaudited) earnings, and may do so by delaying the announcement of bad news, and/or making optimistic estimates of full fiscal year amounts requisite for interim period reporting purposes.

Discussion of To Trade or Not To Trade: The Strategic Trading of Insiders around News Announcements

Korczak, Korczak and Lasfer (2010) (hereafter KKL) examine the likelihood and amount of corporate insider (company director) trading before a news announcement about a corporate event. The novel feature of the paper is that it examines insider trading after distinguishing between good and bad subsequent news announcements. The authors construct a unique dataset of 119,179 news announcements and 8,086 insider trades for 797 UK companies over the period 1999-2002. After separating out the non-confounding announcements, they divide the sample into 39,617 good news announcements and 38,634 bad news announcements, where the definition of good and bad news depends on the two-day stock market return around the day of the announcement. This good-bad classification is determined by how the stock market responds to the announcement relative to the value of the stock on the day prior to the announcement. They match these announcements with the shares traded by corporate insiders in the 30 days before the news announcement. This yields 4,083 good news events and 1,262 bad news events preceded by insider trading. KKL’s approach is then to use a logit analysis to examine the determinants of whether or not insiders trade before a news announcement (the occurrence of insider trading) and an OLS regression of the net quantity of insider trades in the month before the announcement to identify the determinants of the magnitude of insider trades. KKL record two major findings. First, corporate insider trading is more prevalent before good news than bad. Second, the quantity of insider trading before good news is a concave function of the information content (revealed at announcement of the corporate event). Insiders’ trades increase as the information content of the news increases, but it is argued due to regulatory scrutiny, for news announcements with large price impacts, the quantity of insider trading levels out. In

The effects of forecast specificity on the asymmetric short‐window share market response to management earnings forecasts

PurposeThis study aims to test the effects of forecast specificity on the asymmetric short‐window share market response to management earnings forecasts (MEF).Design/methodology/approachThe paper examines a large sample of hand‐checked Australian data over the period 1994 to 2001. Using an analyst news benchmark, it estimates a series of regressions to investigate whether the short‐term impact from bad news announcements is greater in magnitude than from good news announcements and whether this differs between routine and non‐routine MEFs. Additionally, it examines whether (after controlling for news content of MEF) there is a differential market impact conditional on specificity: minimum versus maximum versus range versus point.FindingsThe results indicate that an asymmetric response is evident for the overall sample and a sub‐set of non‐routine forecasts. Contrary to predictions, the results show that forecast specificity, minimum, maximum, range and point MEFs make no additional contribution to the differences in the market reaction to bad or good news.Originality/valueThe study extends the research investigating the short‐run market impact of MEFs. The main element of innovation derives from the interaction between specificity and news content, as well as distinguishing between routine versus non‐routine cases. Notably, it found little support for the view that more specific forecasts elicit greater market responses. What the results do suggest is that managers appear to choose the form of the forecast to suit the news being delivered. In particular, bad news delivered in a minimum forecast seems to be ignored by the market.

Cancer diagnosis announcement: an act to seal the pact of trust between doctors and patients

The announcement of the cancer diagnosis, an important moment in the set up of the doctor/patient relationship, must come together, if possible, with a quality of communication. This announcement is never insignificant, often traumatic both for the one who receives it and sometimes for the person who provides it. It must observe some rules of temporality, in its enunciation and take into account the psychological defences of patient's mechanisms. More accessible, but also more complex medical information is supposed to be more transparent, taking into account the wishes of patients considered as full actors of their health. As such, the announcement of bad news is in a relationship of care, trust represents the start of a full therapeutic act. One of the challenges of the diagnosis announcement remains the education of patients and physicians to encourage better adaptation to the disease and its treatments. This education can only take place in a pluridisciplinarity in order to optimize care. The diagnosis announcement must continuously oscillate between fair distance and proximity while respecting the autonomy, dignity and freedom of patient's choice. The respect of ethical principles will prevent incomprehension phenomena and seal the pact of trust between doctors and patients.