We thank an anonymous reviewer, Reena Aggarwal, Michael Alles, Divya Anantharaman, Bill Baber, Yoel Beniluz, Randy Cepuch, Sandeep Dahiya, Hemang Desai, Patricia Fairfield, Vladimir Gatchev, Aloke Ghosh, Zhaoyang Gu, Carla Hayn, Li Jiang, Bjorn Jorgenson, Srinivasan Krishnamurthy, Carolyn Levine, Xiumin Martin, Korok Ray, Bharat Sarath, Jason Schloetzer, Douglas Skinner (the editor), Jake Thomas, Sheri Tice, Larry Weiss, Joanna Wu, and seminar participants at Georgetown University, Hong Kong Polytechnic University, Rutgers University, SUNY Binghamton, Texas Christian University, University of Colorado at Boulder, University of Houston, University of Michigan, and the 2009 American Accounting Association annual meeting for their helpful comments on previous drafts. Valentin Dimitrov acknowledges the partial financial support received from the David K. Whitcomb Center for Research of Financial Services and the Boutellier Faculty Scholarship. Prem Jain acknowledges financial support from the McDonough Chair at Georgetown University.
It's Showtime: Do Managers Report Better News Before Annual Shareholder Meetings?
Version of Record online: 14 JUN 2011
©, University of Chicago on behalf of the Accounting Research Center, 2011
Journal of Accounting Research
Volume 49, Issue 5, pages 1193–1221, December 2011
How to Cite
DIMITROV, V. and JAIN, P. C. (2011), It's Showtime: Do Managers Report Better News Before Annual Shareholder Meetings?. Journal of Accounting Research, 49: 1193–1221. doi: 10.1111/j.1475-679X.2011.00419.x
- Issue online: 17 OCT 2011
- Version of Record online: 14 JUN 2011
- Accepted manuscript online: 18 MAY 2011 01:28AM EST
- Received 5 January 2009; accepted 26 April 2011
Annual shareholder meetings provide an opportunity for shareholders to express their concerns with corporate performance, pressuring managers to demonstrate good performance. We show that managers respond to the shareholder pressure by reporting positive corporate news before the annual shareholder meetings. Specifically, we find significantly positive average cumulative abnormal returns (CARs) during the 40 days before the annual meeting date. The premeeting returns are significantly higher when shareholder discontent with managerial performance is likely to be stronger. The decile of companies with the worst past stock price performance exhibits average CARs of 3.4% and buy-and-hold returns of 7.0% during the 40-day premeeting period. Companies with poor past performance exhibit even higher premeeting returns when shareholder pressure on management is greater, such as when institutional ownership is high, when CEO compensation is high, and when shareholders submit proxy proposals on corporate governance. We complement the evidence based on CARs by showing how managers of poorly performing firms manage the timing and content of earnings announcements and management forecast announcements before the annual shareholder meetings. Overall, the results suggest that managers attempt to influence shareholders before annual shareholder meetings through positive news.