We find that managers strategically time their bad news forecasts around scheduled releases of macroeconomic news. Specifically, we find a significant increase in the frequency of bad news forecasts on days with scheduled releases of the Federal Funds Rate by the FOMC and the Employment Situation Summary by the Bureau of Labor Statistics releases. This finding is unique to bad news forecasts; there is no evidence for a similar increase in the frequency of good news forecasts. We also find that the strategic timing of bad news forecasts is greater for firms with higher ex-ante shareholders’ litigation risk and with a greater magnitude of forecast surprise, but smaller when managers have self-interested incentives to make their bad news disclosures more, rather than less, transparent. However, despite this disclosure strategy, our stock-price-based tests provide no evidence for investor inattention to firm-specific disclosures on days with macroeconomic news releases. Specifically, we find no difference in either the immediate or delayed stock price reaction between forecasts issued concurrently with macroeconomic news releases and those issued at other times. These results are robust to controlling for the effect of a potential self-selection bias, and to using other proxies for days with a potentially more limited attention to firm-specific announcements. One interpretation of our findings is that the strategic timing behavior we document is motivated by reasons other than to alter the stock price response. In particular, the commingling of stock price effects related to the contemporaneous release of bad news forecasts and macroeconomic news can help mitigate the expected litigation cost related to the firm’s adverse announcement. A second, alternative interpretation is that managers overestimate the level of market inefficiency with respect to the processing of their firms’ information disclosures. Either way, our findings cast some doubt on the notion that investor inattention plays a significant role in the processing of firm disclosures, at least in the context of management earnings forecasts.
