Consumer Behavior
Essay Preview: Consumer Behavior
Report this essay
Hypothesis: 2.0 a 2.3
In this section of the paper we can find the reason of the hypothesis itself, it predicts that if managers withhold, accumulate, and slowly release bad news, but leak and/or quickly disclose good news then the average negative stock price reaction to bad news disclosures will be of greater magnitude than the average magnitude of the positive stock price reaction to good news disclosures. They also develop hypothesis about cross-sectional variation in the magnitudes of stock price reactions to good and bad news disclosures as a function of attributes that proxy for managers incentives and opportunities to withhold information. This assumptions presented in this paragraph are the main reason that the article is trying to explain for the behavior of the stock markets participants. Also we find a logical explication of why is possible for manager to withhold bad news.

First of all we need to understand that managers most reveal good or bad news symmetrically without withholding any news because new information is assumed to arrive randomly with managers having little control over the arrival of news. The article explains that the distribution of news reaching the manager is assumed to be symmetric, it seems reasonable to expect that randomly arriving good and bad news should have similar and symmetric distributional properties. Since the manager discloses all information, good and bad, quickly, its dissemination should generate symmetrically distributed stock price changes. As a logic matter it explains that if this information is correctly symmetrical the bad news and good news are supposed to be balance or equal.

As an explication of how does it start; managers reserve the bad news and they know they must reported but instead they decide to keep it until the have a lot of good news reported so the bad news would not be so affecting, and the moment for them is also correct when the it becomes too costly or difficult to withhold the bad news and this triggers disclosure.

Get Your Essay

Cite this page

Bad News And Good News. (June 14, 2021). Retrieved from https://www.freeessays.education/bad-news-and-good-news-essay/