Voluntary Disclosure of Management Forward-Looking Statements during the COVID-19 Pandemic

Abstract

This thesis provides insights into forward-looking statements (FLS) issued by US-based companies from 2016 to 2022, covering both the pre-pandemic and pandemic periods. FLS are voluntarily issued by a firm’s management to directly communicate their outlook on the company’s future performance. The widespread market disruptions and increased uncertainty resulting from the COVID-19 pandemic have made the issuance of FLS more crucial. Therefore, through descriptive analysis of the issuance patterns of FLS, I initially find that FLS issued during the pandemic differ in form (quantitative and qualitative), content (earnings or non-earnings), and horizon (long-term and short-term) compared to those issued before the pandemic. I then use seemingly unrelated regressions to test the impact of the pandemic on managers’ decisions to issue various types of FLS. The results show that the pandemic has a stronger negative effect on the issuance of quantitative earnings FLS compared to other FLS (i.e. FLS excluding quantitative earnings FLS). When further comparing across various forms of FLS, results suggest that the pandemic has a stronger negative effect on the issuance of forward-looking information in quantitative form than in qualitative form. The results are consistent with prior literature indicating that management’s decision to issue different types of FLS involves a cost-benefit trade-off and can also be impacted by increased uncertainty. Additionally, I find that market reactions to the issuance of FLS become less pronounced during the pandemic. Further analysis reveals that the market reaction to the issuance of quantitative earnings FLS is less pronounced during the pandemic. In contrast, the market reaction to the issuance of other FLS does not change during the pandemic. These results suggest that the pandemic can influence market reactions to the issuance of different types of FLS.