Short version: managers don't like to tell bad news.
SSRN-Do Managers Withhold Bad News? by S.P. Kothari, Susan Shu, Peter Wysocki:
"In this study, we examine whether managers delay disclosure of bad news relative to good news. If managers accumulate and withhold bad news up to a certain threshold, but leak and immediately reveal good news to investors, then we expect the magnitude of the negative stock price reaction to bad news disclosures to be greater than the magnitude of the positive stock price reaction to good news disclosures. We present evidence consistent with this prediction. Our analysis suggests that management, on average, delays the release of bad news to investors."While several potential explanations are given to the larger price drop (including agency cost stories), it is possible that the more pronounced stock price declines might be caused by non-symmetry in investor utility curves.
The authors said to include the copyright, so here it is:
the paper is Â© 2005 by S.P. Kothari, Susan Shu, Peter Wysocki.
a more traditional cite:
Kothari, S.P., Shu, Susan and Wysocki, Peter D., "Do Managers Withhold Bad News?" (September 2005). MIT Sloan Research Paper No. 4556-05 Available at SSRN: http://ssrn.com/abstract=803865