Kristian Allee is Assistant Professor of Accounting at the University of Wisconsin. This post is based on an article authored by Professor Allee; Ted Christensen, Professor of Accounting at Brigham Young University; Bryan Graden, Assistant Professor of Accounting at Illinois State University; and Ken Merkley, Assistant Professor of Accounting at Cornell University.
Understanding the formation of firms’ disclosure practices is of significant interest to regulators, managers, and investors. Anecdotal evidence and prior disclosure research generally conclude that firms’ current disclosure practices are often tightly connected to prior disclosure practices. However, prior disclosure practices must have a beginning in their own right, begging the questions of when and why disclosure practices begin. In our paper, When Do Firms Initiate Earnings Guidance? The Timing, Consequences, and Characteristics of Firms’ First Earnings Guidance, we examine when firms initiate earnings guidance (i.e., establish an earnings guidance policy) after an Initial Public Offering (IPO) and what factors are associated with the initiation decision.