This study investigates the role of the business press in disseminating management earnings guidance news to capital market participants. Using a unique sample of over 55,000 articles that relate specifically to management guidance, I find that 48 percent of all guidance receives coverage in the business press, with substantial within-firm variation. I then identify firm and guidance characteristics that are associated with the likelihood that guidance receives press coverage. Controlling for the endogeneity of press coverage, I find that dissemination in the press has a significant impact on the market reaction to guidance, and this effect is economically large. This study is the first to provide evidence that there is systematic variation in the extent to which guidance news is disseminated through the press, and that this variation has a significant effect on the market consequences of guidance.

abstract: While credit rating agencies use both forward-looking and historical information in evaluating a firm's credit risk, the role of forward-looking information in their rating decisions is not well understood. In this study, I examine the association between management earnings guidance news and future credit rating changes. While upward earnings guidance is not informative for credit rating changes, downward earnings guidance is significantly and positively associated with both the likelihood and speed of rating downgrades. In cross-sectional analyses, I find that downward guidance is especially informative in two important circumstances: (i) when a firm's current credit rating is overly optimistic compared to a model predicted rating, and (ii) when the relevance or reliability of alternative information sources is lower. In addition, I find that downward guidance is associated with lower future cash flows, as well as a higher volatility of future cash flows. Overall, the results are consistent with credit rating agencies incorporating voluntary bad news disclosures into their decisions about whether and when to downgrade a firm. / Dissertation/Thesis / Doctoral Dissertation Accountancy 2015