An International Meeting of the American Accounting Association American Accounting Association 2006 Annual Meeting August 6–9, 2006 Washington, D.C.

Shuping Chen
University of Washington Business School

Dawn Matsumoto
University of Washington Business School

Shiva Rajgopal
University of Washington

Abstract: We investigate a sample of 76 firms that publicly renounced quarterly EPS guidance in the post-FD period (10/2000 to 10/2004). We find that stoppers have poor trailing earnings and stock return performance, and lower institutional ownership. We document an average –3.6% three-day return around the announcement to stop guidance and this reaction is associated with poor future performance. After the elimination of guidance, stock prices lead earnings less but there is no change in overall stock return volatility or analyst following. However, analyst forecast dispersion increases and forecast accuracy decreases following firms’ decision to stop guiding.

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