It’s Showtime: Do Managers Report Better News Before Annual Shareholder Meetings? by Valentin Dimitrov, Prem Jain :: SSRN

I hope no one is surprised by this: managers seemingly try to influence analysts and shareholders by providing good news just prior to the firm's annual meeting. That is the conclusion on a paper by Dimitrov and Jain that examines the 40 days prior to the firm's annual shareholder meeting.


It’s Showtime: Do Managers Report Better News Before Annual Shareholder Meetings? by Valentin Dimitrov, Prem Jain :: SSRN:

The pre-meeting 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 cumulative abnormal returns of 3.4% and buy-and-hold returns of 7.0% during the 40-day pre-meeting period. Companies with poor past performance exhibit even higher pre-meeting 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.

One caveat that I would like strengthened a bit: reversion to the mean.  If a firm is in worst performing decile, it may get better just by chance/bid ask bounce, etc.

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